| # The Adjustment Period An adjustment period refers to a fixed period of time, consisting of intervals, during which the proportional taxable usage of a capital item is re-evaluated. For land and building, the adjustment period consists of 10 intervals (inclusive of both, the first and the final intervals) and for all other capital items, the adjustment period can consist of only 5 intervals. Categories of the time interval According to the CGA, the intervals in which the re-evaluation and adjustments must be made, can be categorized as 'first', 'subsequent' and 'final' interval. The 'first' interval for a capital item commences from the date when the capital item is imported, acquired or supplied. According to the CGA, you must not make adjustments to the first interval. In the 'subsequent' and the 'final' time interval, adjustments are made to the initial input tax claim when the proportional use of the item, fluctuates in each interval. If the proportional taxable use decreases in the subsequent or the final time intervals (as compared to the first time interval), a certain percentage of input tax that is claimed initially, must be paid back to RMCD. Conversely, if the taxable use of the capital item increases, the additional amount of the input tax can be claimed on the capital item. According to the CGA, you must not make any changes after the adjustment for the final time interval is made. There are two methods to determine the additional input tax incurred on a capital item after the first time interval. The two options are: Combined adjustments This approach involves combining the adjustment calculations for the remaining time intervals. Each time an additional input tax is incurred, the base percentage must be re-evaluated and used to measure the additional input tax for the next interval. The base percentage can be calculated by determining the percentage of input tax that has been reclaimed for the intervals that expired. Parallel adjustments This approach involves separate, but simultaneous calculation adjustments for the remaining time intervals. |