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BusinessGov’t temporarily exempts baby formula milk from VAT

Gov’t temporarily exempts baby formula milk from VAT

Importers of baby formula milk are not required to pay value added tax (VAT) following a new temporary exemption rule placed by authorities at the Ministry of Finance.

The government is removing taxes from breastfeeding replacement milk products from in consideration of increasing prices and complaints from parents.

Dubbed infant formula (infant milk), prices of these imported products have been rising lately. The upsurge has been a headache to parents with newborns for long. Initially, the products were exempted from VAT while importing but later on, the government began applying taxes on the products due to a lack of detailed information.

Following complaints of increasing prices and a lack of foreign currency to import the products, the Ministry of Finance decided to come up with the decision, according to an official at the Ethiopian Customs Commission.

“It used to be free of tax primarily but later we begun to charge the tax for lack of traceable information,” the official said.

Later with the decision of revoking VAT, the Commission has already instructed branch offices to execute the new rule as of June 25, 2022.

“It is based on an order given from the Finance ministry,” said the official. “It will be implemented at all checkpoints.”

Due to the unavailability of local producers, parents have always been dependent on imports of these products. Categorized under the tariff code 1901.1000, infant formula has been one of the major products imported to the country but is rare in the market.

About 616 tons of infant formula products have been imported to Ethiopia, amounting to over 231.6 million birr in six months spanning from September 2021 until February 2022. Import tax of about 16.2 million birr was secured by the government from the same product, according to the data from the Customs Commission.

Brands such as Liptomil, S-26, NAN, FRANCE LAIT, Similac, Mimi Lac and Enfamil are the most popular infant milk products in Ethiopia.

“These products are crucial for babies and considering the current high market, it has been decided to lift the VAT from them temporarily,” reads the letter by the Customs Commission addressing its branch offices.

The letter further orders executing personnel to selectively identify the products and add them to the customs procedure code, which includes products exempted from VAT.

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