Performance Report 2007 - Department of Inland Revenue

2.5 Value Added Tax Collection
The Value Added Tax (VAT) collection of Rs. 186.99 Billion during the year indicates a shortfall
of Rs: 14.6 Billion over the estimated amount of Rs: 201.6 Billion for the year. However, this is
an increase of Rs: 22.9 billion or 13.96% over that of the previous year. VAT represents 60.67%
of the total revenue collection in the year. The number of permanent VAT registered persons
rose up to 29,537 with the opening 2,819 new VAT files during the year.
In order to maintain revenue at desired level, restrictions were introduced in relation to deduction
of input tax, to the lower of actual input tax or 85% of the output tax, with carry forward
provisions of the balance.
However these restrictions are not applicable to-
‣ any supplier whose supplies are zero rated;
‣ any supplier who is registered with TQB or EDB for the supply of goods or certain
services to exporters;
‣ any person registered under Sec. 22 (7) of the VAT Act.
Further, provisions were introduced to withhold 1 / 3 of VAT payable to contractors and any other
service providers, on supplies made to Government Agencies.
In order to mitigate the impact of undervaluation, the markup applicable on CIF value on
importation has been increased to 10%.
VAT Rate Changes
‣ VAT payable on ticketing machine (used in Busses) tax was reduced by 5%;
‣ VAT payable on supply of Jewellery was reduced from 20% to 5% w.e.f. 01.01.2007;
‣ VAT payable on high tech Medical equipment was reduced to 5% from 15%.
VAT Exemptions
‣ Production, Distribution and exhibiting of any film;
‣ Supply of laboratory services for film industry;
‣ Importation of any film produced in Sri Lanka and taken abroad for further
processing or printing with the approval of the NFC;
‣ Chartering of Vessels;
‣ Importation of any Bus by any Bus owner holding a valid route permit;
‣ Supply of electricity, generation and distribution of electricity w.e.f.01.01.2007;
‣ Machinery and equipments imported by Ceylon Electricity Board (CEB) and
private power suppliers;
‣ Import or supply of furnace oil;
‣ Supply of locally manufactured Handloom textile w.e.f.01.01.2007;
‣ Machinery imported for modernization of Tea Rubber and Coconut Processing;
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