Saudi Arabia's Shura Council officially approved the draft Value Added Tax (VAT) law on Wednesday, Saudi Gazette reported.  

Yahya Al-Samaan, assistant president of the Council, said the decision was made after its members listened to the financial committee's report on the matter. 

The council's members "also stressed the need for activating the uniform program for Citizen Accounts prior to implementing VAT," the Saudi Gazette wrote

While the five percent tax is set to apply to most products and services, it will exclude health, social services, and education. 

Introducing VAT is part of major economic reforms currently taking place in Saudi Arabia. It comes months after the country announced it would be implementing the new tax starting January 2018. 

The January announcement goes hand in hand line with a GCC agreement made in February 2016.  

The agreement sets to implement VAT across Gulf countries and was approved amid significant drops in oil revenues last year. 

The decision was welcomed by Christine Lagarde, managing director of the International Monetary Fund (IMF), who voiced her support to the move, stressing the importance of raising non-oil revenues.  

So how does it work?

According to a study published by Saudi Arabia's Monetary fund, "VAT is a multi point sales tax with set off for tax paid on purchases." 

"It is a general tax that applies, in principle, to all commercial activities involving the production and distribution of goods and the provision of services," the study said.  

Often referred to as a "tax on consumption," the levy is charged as an added percentage to the price of goods or services.                                                                             

What do people think?

Soon after Saudi Arabia's Shura Council approved the VAT tax, thousands took to the trending Twitter hashtag: #ضريبه_القيمه_المضافه (Value Added Tax,) to share their thoughts on the news. 

Some are against it

"So when someone wants to buy a car, they'll have to pay an extra 5 percent over its price? It's too much. The only people who'll benefit out of this are tradesmen, while the poor will continue to get poorer."  

"Implementing VAT without tackling the high rates of unemployment, raising salaries and solving housing issues will not be in the interest of the public."  

Others are going to buy everything they need before 2018

"We should start buying everything we need before the year ends."  

Many are for the tax

"I am all for anything the state decides."  

Totally supporting its implementation

"The tax won't be added to one hundred 'basic need' products and it'll provide the government with a new source of income. I am all for the decision." 

Not the only tax to be imposed

The VAT isn't the only tax recently approved by the kingdom. 

Earlier in June, the country imposed a 100 percent "sin tax" on tobacco and energy drinks.  

The tax includes a 50 percent levy on soft drinks. 

In July, Saudi Arabia also began applying an "expat tax" that affects residents of the country and their dependents. 

The taxes are part of economic reforms that come in line with the kingdom's Vision 2030

The ambitious blueprint is slowly transforming and revolutionizing various aspects of the kingdom's social, economic, and political landscapes.