Small scale taxpayers are exempted from VAT when selling rice, provided that the rice is produced and sold by agricultural producers. If the rice is purchased and then sold, it is not exempt from VAT. VAT refers to a kind of tax levied on the value-added obtained by units and individuals engaged in selling goods, providing processing, repair and replacement services, and importing goods. It is a turnover tax.
Legal basis
The following items in Article 15 of the Provisional Regulations of the People's Republic of China on Value Added Tax are exempt from VAT: (1) self-produced agricultural products sold by agricultural producers; （2） Contraceptives and devices; （3） Ancient books; （4） Imported instruments and equipment directly used for scientific research, scientific experiment and teaching; （5） Imported materials and equipment provided free assistance by foreign governments and international organizations; （6） Articles imported directly by organizations of disabled persons for the special use of disabled persons; （7） Sell used items. In addition to the provisions of the preceding paragraph, VAT exemption and reduction items shall be formulated by the State Council. No region or department may stipulate tax exemption or reduction items.
