Congress: Exoneration of IGV on products from the basic basket means price reduction by 15.25%

This Thursday, April 7, the plenary session of the Congress approved an initiative that seeks to exonerate the General Sales Tax (IGV) to staple foods from the basic family basket (chicken, egg, noodles, flour, meat, among others). Thus, if it were transferred entirely to the final consumer, prices would decrease by 15.25%.

According to the professor and financial expert at Pacífico Business School, Jorge Carrillo Acosta, the reduction figure cannot be 18%, since this figure corresponds to the “sales value” and not the “sale price”, it is the final amount paid for a product. The sale price corresponds to the value of the sale plus the VAT.

The initiative proposes to establish the exemption from the General Sales Tax (IGV), which taxes the import or internal sale of chicken, eggs, milk, wheat flour, noodles, sugar and meat products. It also proposes to create a mechanism for the use and return of the accumulated IGV tax credit that would have taxed the acquisition of raw materials and inputs and other services used in the production process of exonerated food.

However, the expert estimates that, in practice, the percentage of price reduction will be less than 15.25 per cent. This is because “businesses recovered the IGV from purchases with the IGV of sales (tax credit), and if the final product is exonerated, the VAT paid on some purchases will become a 'cost overrun'”. This means that, when the amount for the payment of the VAT is not recovered, it will be transferred to the consumer.

The approved standard applies from the first calendar day of the month following the date of its publication and until December 31, 2022.

VOTING IN CONGRESS

Due to the demonstrations of citizens about the increase in the prices of the family basket, the proposal was supported by 97 congressmen, nine against and two abstentions. Subsequently, by 96 votes in favour, ten against and one abstention, he was exonerated from the second ballot.

In addition to the above, Appendix I-A is incorporated into the Single Ordered Text of the General Sales Tax and Selective Consumption Tax Act, approved by Supreme Decree 055-99-EF.

However, it is established that the application for the refund of the accumulated and unused tax credit, which may be submitted every three months and for a minimum amount of one Tax Unit (ITU). The form, deadlines and other conditions are regulated by Sunat.

At the same time, as a final supplementary provision, it is provided that by a supreme decree endorsed by the Minister of Economy, the regulations necessary for the application of the law be established.

The transitional supplementary provision refers to the fact that the Executive Branch is entrusted with the formation of a multisectoral Commission composed of a representative of the Ministries of Economy, Agricultural Development and Energy, to assess the reduction of costs of food products and mechanisms to benefit the Amazon.

It is also established that Sunat and Indecopi will be responsible for monitoring the sales prices to the final consumer of food products that are part of the basic family basket.

“It has been possible to approve on the exemption from IGV that some products in the family basket are found and I think it is very important because it will help to have a break for those families, who have suffered the price hike all these days. I think that when the Congress of the Republic comes to have points in common, important projects come out,” Congresswoman Rosangella Barbarán told Radio Exitosa.

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