A Life in Tax: When Water Is Not Just Water. I still remember the call. It came from a small water factory owner in Ogun State—anxious, almost defensive.
“Sir, they say we should start charging VAT on sachet water. But water is a basic food item… isn’t it?”
That single question captures the lived reality of tax practice in Nigeria: the law on paper versus the law in motion.
With the Nigeria Tax Act 2025 now in force, the VAT treatment of water is no longer a grey area—but many taxpayers are still navigating it as if nothing has changed. This is one of those moments where tax is not about arithmetic; it is about interpretation, boundaries, and context.
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The First Lesson I Learned: Zero-Rated Is Not Exempt
When I sat with that water factory’s records, the first misconception became obvious.
They believed that because water is a basic food item, VAT simply does not apply.
But tax law rarely works in absolutes. Under the Nigeria Tax Act 2025, water qualifies as a basic food item, yes—but basic food items are zero-rated, not exempt. That distinction is everything.
Zero-rated means:
- You are still a taxable person
- You must still register for VAT
- You must still file monthly returns
- You may still recover input VAT, if properly documented
- In tax practice, zero-rating is not freedom. It is disciplined compliance with a softer rate.
The Definition That Changed Everything
- The turning point in my analysis came from sections 186 & 188(p) of the Nigeria Tax Act 2025.
- The law does not leave “water” to imagination. It defines it with surgical clarity:
- Water includes natural water and table water—spring water, rain water, pipe-borne water, and well water.
- On that basis, sachet water and plain bottled water clearly qualify.
- But tax law always gives with one hand and takes with the other.
When Water Stops Being a Basic Food Item
In another engagement, I advised a bottled water company proudly launching a new “mint-infused hydration experience.”
The branding was elegant. The margins were attractive. The VAT position? Dangerous—if misunderstood. The Act expressly excludes from zero-rating: Sparkling or flavoured water Water sold in hotels, restaurants, cafés, lounges, or similar settings. Water supplied by contractors or caterers
Once water crosses into enhancement, service, or context-based supply, it loses its protection. That mint-infused bottle was no longer “basic nourishment.” It was a value-added commercial product—and VAT followed it.
A Hotel, a Bottle of Water, and a Costly Assumption One of the most common errors I see happens in hospitality. A hotel manager once asked me:
“But it’s still water. Why should VAT apply just because we sell it in a hotel?”
That is when tax teaches humility. In VAT, context overrides substance.
The same bottle of water:
- Sold in a supermarket → zero-rated
- Supplied in a hotel room → standard-rated
- Why? Because the law is not rewarding the molecule called H₂O.
- It is targeting essential consumption, not bundled services.
The Contractor’s Mistake
Then there was the construction contractor. He supplied drinking water to workers on site and recharged the cost to the client. He treated it as zero-rated. The assessment that followed was brutal.
Why? Because the Act is explicit:
Water supplied by contractors does not enjoy zero-rating. In tax, who supplies can be just as important as what is supplied.
What the Law Is Really Saying
After years in tax practice, I have learned to read beyond sections and schedules. The Nigeria Tax Act 2025 is making a policy statement:
- Water is protected only as an essential good
- Relief is narrow, intentional, and conditional
- Commercial enhancement, hospitality, and bundled services fall outside the safety net
- This is not ambiguity. It is design.
The Final Lesson
When I called back the water factory owner, the conversation had changed.
He understood that:
- He was not VAT-exempt
- His sachet water was zero-rated
- His compliance obligations remained
- His records were his first line of defence
- That is the essence of A Life in Tax.
- Tax is not about slogans like “water is basic.”
It is about definitions, exclusions, context, and discipline. - And under the Nigeria Tax Act 2025, water is only tax-favoured when it remains exactly what the law says it must be—nothing more, nothing less.
Olatunji Abdulrazaq CNA,ACTI,ACIArb(UK)
Founder/CEO,Taxmobile.Online
