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Sir the study text states that gifts of inventory or non-current assets are treated as taxable supplies at replacement cost. But my question is if we levy Output VAT from the recipient of the gift, then that gift doesn’t remain a gift.
And if we assume that output VAT cannot be levied from the recipient and simply borne by the ‘gift-giver’ then dont you think that the gift-giver will try to show as low of a replacement cost(of the gift given) as possible?
As per my earlier advice – stop making up “but what if scenarios” that often make little practical sense and are not exam issues, when you should be concentrating on learning what is in the notes and must be known to pass this exam.
On such a gift the trader accounts for output VAT – it is not charged to the recipient! The trader cannot then make up any number they want for this item the replacement cost is a matter of fact and in a question would be given.
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