On-shelf prices may NOT reflect VAT increase in 2025

South Africa’s coalition government is seemingly in tatters over the divisive VAT increase in 2025. After the 2025 Budget was approved in the National Assembly yesterday (Wednesday 3 April 2025), with spurious help from ActionSA and BOSA – who are both outside the GNU – the DA immediately filed papers in the High Court to have it overturned. Nevertheless, another more practical concern for consumers over the VAT increase in 2025 has come to light.  

There is no law that compels businesses to adjust on-shelf prices to reflect the VAT increase in 2025, reports Daily Investor. Anyone who’s visited the United States will have experienced this annoying phenomenon. Basically, the price of an item on-shelf doesn’t correlate with what it costs you at checkout. Therefore, South Africans should exercise caution when the first VAT increase in 2025 kicks in on Thursday 1 May 2025.

VAT INCREASE IN 2025

Legal experts explain that this practice is indeed in order just as long as any VAT-registered vendor displays the appropriate notice in-store. A simple sign can inform customers that the price on-shelf does not include the VAT increase in 2025. Moreover, the SARS commissioner has given permission that VAT vendors may increase the price of products in stores to include the higher rate of 15.5% without having to change individual on-shelf prices.

In the related SARS guidance document, a notice should include, with equal prominence, an example of the old and new prices. Furthermore, the notices should be prominent at all entrances and points of sale where payments are made, explained SARS. Nevertheless, smaller retailers with simplistic reporting systems may have to manually work through the VAT increase in 2025. This will, no doubt, take additional time to adjust, especially as newly zero-rated products come into account.

TOUGH TIME FOR SMALL BUSINESSES

Another issue is how any non-VAT-registered business will bear the burden of higher operational expenses. The VAT increase in 2025 will initially strain cash flows, particularly for SMEs with limited budgets. Experts anticipate that SMEs will have to absorb the VAT increase up front to remain competitive. This is the only way to retain a customer base looking to tighten their belts. Basically, not all businesses will be able to pass on the higher costs to consumers and still survive. This will lessen their profit margin, and the overall financial impact on companies will be a negative one as they tighten up their financial reporting.

HOW WILL YOU ADJUST YOUR SPENDING TO THE VAT INCREASE?

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