VAT: Baqalas, boofiyas incur losses; face uncertain future


Saudi Gazette

— Grocery stores (Baqalas), restaurants and several other small shops that do not have technology and GAZT (General Authority for Zakat and Tax ) certificate for VAT implementation are incurring a minimum of 5 percent loss in each commodity that they are selling thus causing them huge accumulated losses.

Many of these grocery stores, restaurants, vegetable shops and several other stores are now contemplating to either sell off their shops or close them down permanently and look for some other venture or jobs.

A random survey conducted by Saudi Gazette of small grocery stores, popularly known as baqalas show that while they are paying 5 percent VAT on each and every product that they are buying from the supplier or manufacturers, but in return are unable to charge them from their buyers as they don’t have the technology nor VAT certificate from GAZT.

“Most of the goods that we sell are branded and popular products and their prices are well known and could not be hiked,” said a baqala owner in Al-Khobar who spoke on condition of anonymity as he fears punitive action from authorities.

They are selling these products on the listed maximum retail price. For example Al-Marai Fresh Milk is for SR4 and they have to sell it at SR4 but when they buy in bulk from the supplier they pay 5 percent VAT on the overall invoice.

The same story goes for edible oils, rice, lentils, toiletries, spices, frozen poultry, all dairy products, juices, mineral water, soda drinks and several other groceries. On the other hand, when they are selling those products they are bound to charge prevailing market price.

“Consumers are too price conscious these days due to prevailing market conditions. No one will pay a single halala extra. I will not deny that in some unpopular products we do adjust few halala or even riyals but they are not sufficient to compensate the overall loss,” said another grocery store owner in Dammam.

These grocery stores still operate on the old practice of working on calculators and dealing in cash only. They don’t have cash registers and computers nor do they have certificate from GAZT.

Similar is the story of small time restaurants and boofiyas (snack kiosks). They too are paying VAT on products that they are buying from the suppliers like breads, chicken, eggs, milk, tea, juices etc. but are still selling their products at the same old price. “We initially tried to hike prices of some of our prime products like sandwiches but customers did not accept it,” said owner of a boofiya.

Some methodology is needed to be evolved to either exempt them from VAT or provide them with technology to charge VAT as they too should be brought under the latest regulation.

If it is not done then several grocery stores and restaurants will close down rendering dozens and dozens of Saudis jobless.