History of VAT in South Africa: How the Sales Tax System Evolved
South Africa introduced VAT at a statutory rate of 10% in 1991 to replace general sales tax which had been levied since 3 July 1978. A key feature of VAT is its charge at each stage of production and distribution compared with general sales tax which created a more neutral impact on tax revenues collected, though mildly regressive capture a greater share of poor’s incomes.
VAT was introduced on September 30, 1991, under the Value-Added Tax Act 89 of 1991 (VAT Act) to replace GST. It increases with time over the years and the current VAT rate is 15%, which came into effect on April 1, 2018. VAT, or Value-Added Tax, is a key source of income for the South African government, second only to personal income tax (PIT). In fact, reports suggest that South Africa’s VAT system is one of the most effective, alongside New Zealand’s.
History of Sales Tax in South Africa
General Sales Tax (GST)
| No. | Date | GST rate |
| 1 | 3 July 1978 | 4% |
| 2 | 1 March 1982 | 5% |
| 3 | 1 September 1982 | 6% |
| 4 | 1 February 1984 | 7% |
| 5 | 1 July 1984 | 10% |
| 6 | 25 March 1985 | 12% |
Value Added Tax (VAT)
The sales tax changed from GST to VAT on 30 September 1991.
| No. | Date | VAT rate |
| 1 | 30 September 1991 | 10% |
| 2 | 7 April 1993 | 14% |
| 3 | 1 April 2018 | 15% |
South Africa uses a “destination VAT” system, meaning the VAT is applied where the good or service is finally consumed. VAT is typically payable when a business issues an invoice. This applies to everyone except municipalities and small businesses with a turnover under R2.5 million per year, who might have a different payment schedule. You can further study the complete guide by the National Treasury of South Africa on tax history here.