URA’s DTS biting hard to ensure compliance

Manufacturers of a local beverage called Kombucha say the profit numbers of their businesses are nolonger colourful. Ever since Uganda Revenue Authority added the beverage to the list of items that need to have a digital tracking solution (DTS) for tracing, the manufacturers have been up in arms.

Sam Turyatunga, the president, Uganda Kombucha Manufacturers Association, says DTS is an expensive venture that has increased their cost of production and affected their profits. The customers of the Kombucha products will part with an additional cost to allow the producers meet their expenses.

“Digital stamps come with a lot of taxes arising from the need to put a digital stamp on your product so that someone can count and know how many bottles you have produced in the whole year or in a month. For example, the excise duty for Kombucha is Shs 230 per litre and the stamp is Shs 35 per bottle yet you have to add VAT and all this heighten production costs,” Turyatunga said.

Turyatunga also added that customers now cannot enjoy freebies since every bottle is charged.

“When a customer bought 100 cartons, you would give them three extra cartons. Since each bottle is counted by URA, it means we have to stop all that,” Turyatunga explained on how DTS has cost them.

For business, digitizing technologies eases and quickens thousands of processes. Most companies have to fully adopt to increase productivity and quality of their products for customers. This is one of the many reasons the government implemented the Digital Tracking Solution in November 2019. Aside of improved revenue especially for VAT and Local Excise Duty, the solution is intended to ensure that the public consumes authentic products from a protected market.

According to Robert Amanya, the Acting manager, DTS in URA, there is no need for manufacturers to increase prices of products because any added cost passed on to the final consumer is always claimed as a credit in their VAT input tax and as expenses in their income tax.

“The taxpayers who may be complaining now fall in the category of those that have never paid any excise duty, VAT or income tax to date. The extra cost is due to the fact that now they have to dig into their extra ordinary profits,” Amanya said.

Although there is still need for continuous tax education on DTS, Amanya noted that there is an improvement in the number of taxpayers complying. At inception, they were 107 taxpayers and now 545 manufacturers and 140 importers have been brought into the tax net. This translates to Shs 687 billion of total revenue collected as a result of DTS.

Through ongoing countrywide enforcement operations on manufacturers who are still in possession of unstamped gazetted products, URA expects to collect more. From the exercise, URA has raised more than Shs 13.39 billion and introduced additional taxpayers to the register.

Today, URA has 2,321,828 taxpayers on the tax register attributed to initiatives such as DTS. URA says DTS is a solution that enables tracking and tracing of a product right from production or importation through distribution to consumption. It provides for application of Digital Tax Stamps by manufacturers/importers using both manual and automated processes of production, and the verification of products from the factory/importation to the point of sale.

The stamps are physical in nature and are applied on goods or their packaging containing security features such as codes for the purposes of fighting counterfeits and allowing for the tracing of goods.

The initiative is intended to combat illicit trade, substandard or counterfeit products, protect consumers against harmful products, encourage fair competition in the market, and increase government revenue towards national plans.

Currently, there are 13 gazetted products for DTS, according to URA, and the implementation has been in a phased manner. The first eight products include: beer, soda, bottled water, wines, spirits, tobacco products, sugar and cement. From May 1, 2022, URA added other products comprising cooking oil, fruit and vegetable juices, non-alcoholic beverages (kombuchas, teas and health drinks, bushera), alcoholic beverages and fermented beverages (cider, mead, perry or other form of beers).

URA encourages taxpayers to register for the DTS by procuring tax stamps, affixing and activating them on their products to avoid penalties which can be detrimental to their business.