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Rice processed by removing the husk does not become a new food type nor gain new value as required by VAT law for processed foods. Therefore, rice sold by RWAMAGANA RICE Ltd is not subject to TVA, and the Commercial High Court correctly interpreted and applied the statutory and regulatory provisions. RRA's appeal lacks merit.
Source excerpt
Rice processed by removing the outer husk does not become a new kind of food under Article 2(3) of Law No. 37/2012; both a change in kind and increase in value are required for VAT liability on processed foods. The process performed by Rwamagana Rice Ltd does not meet these cumulative criteria. Therefore, the VAT assessed by RRA was not lawfully imposed.
Source excerpt
The Court of Appeal held that SODAR Ltd’s rice was not “processed food” for VAT purposes because it did not become a new type of food, so RRA’s appeal failed.
The rice processed and sold by SODAR Ltd, although cleaned and hulled, does not constitute a new type of food but remains rice. Both statutory and expert evidence require that, for VAT to apply, the food must be transformed into a new type and its value increased. Since only value increased but the type did not change, the rice remains VAT-exempt. The High Commercial Court correctly interpreted the law and evidence.
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