Customers rush to beat VAT

With the countdown having begun for VAT (value added tax) rollout, retailers are in a buoyant mood as they see a rise in sales volume despite night closure of commercial activities.

From jewellery to home appliances and automobile to building materials, there have been rush of customers to buy items of their choice to beat the VAT, even though it is just about five per cent.

“From a consumer behaviour perspective, it’s not about the amount. It’s not even about how much one can save; it’s about whether you can save or not,” said Jose Chacko, partner, Crowe Oman.

“Even though 5 per cent is not a big levy, psychologically, people think it is better to buy before its implementation, he said.

VAT will be the second major tax being implemented in Oman following excise tax last year that raised the prices of tobacco products, alcohol and energy drinks by 100 per cent and prices of carbonated drinks by 50 per cent.

VAT in Oman will be levied on most goods and services, with exceptions for essential food items, medical care, education and financial services, according to Oman’s Tax Authority Chairman Saud bin Nassir al Shukaili.

This should raise around RO 400 million each year, which will be equivalent to around 1.5 per cent of gross domestic product (GDP).

“People are buying fridges, ACs and other home appliances. We expect the purchases to increase in the coming days as the VAT implementation coincides with the beginning of Ramadhan,” said Abu Abdul Salam, sales manager at a home appliance retail shop in Ruwi.

Expensive items such as consumer electronics and appliances would be the most affected by VAT, as consumers are going to be rushing to buy them ahead of April 16, he said.

Demand for building materials, according to retailers in the buzzing Honda Road marker, have registered a substantial rise in the recent days following a revival in the real estate and construction activities.

“There has been a slight recovery in the recent days thanks to the rise in the real estate activities. We expect the sales to increase in the coming days as many of the items are included in VAT,” said Haris Melethu, a retailer.

Demand has been very weak but people are now actively buying ahead of the VAT so there is a bit of demand,” he said.

Jewellery shops, aided by the recent fall in the prices of gold, too are witnessing rush of customers. Many of them have come out with pre-VAT offers.

“We are witnessing an increase in customer footfall during this pre-VAT period. Gold has always been a preferred form of investment for majority of the people. The demand for gold will continue to increase because of its value appreciation”, said Najeeb K, Regional Director of Malabar Gold & Diamonds.

As part of the Pre-VAT Savings campaign, Malabar Gold & Diamonds has introduced attractive offers for customers to maximise their savings before the implementation of VAT.

Similarly, some of the automobile dealers too have come out with offers to lure customers.

In a text message to customers, a dealer called on potential customers to “Take advantage of the pre-VAT offers’’.

The 5-per cent VAT rate covers the supply of all goods and services in Oman, except for certain exempted categories and cases.

The list consists of 94 customs tariff items to be exempted from the VAT, namely meat, fish, poultry, dairy products, fresh eggs, vegetables, fruits, coffee beans, tea, cardamom, grains, olive oil, sugar, baby food products, bread, bottled water and table salt.