VAT Guide to Value Added Tax - sri lanka inland revenue ...

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Chapter - 18 Leasing & VAT 18.1 Lease means a transfer of the right of possession of an asset for use by another person for a term in return for a consideration. There are two types of leases namely finance leases and operating leases. However there is no difference in treatments in VAT between the two types of leases other than the application of rates as per para 18.3 below. 18.2 In a leasing transaction only the possession of goods passes to the lessee while the title remains in the lessor. It is therefore not a supply of goods. Under the definition (Section 83), any supply which is not a supply of goods is a supply of a service. As no supply of goods is involved the “value of supply” is not the value of goods (as in hire-purchase) but the amount of the “lease rental”. 18.3 The rate of VAT is 20% except when the leasing facility is supplied under Finance Leasing Act No.56 of 2000 where the rate is 10%. 18.4 VAT is exempted on the supply of leasing facilities to motor coaches which are used for public passenger transport services if the seating capacity is 28 or more passenger seats. (Note that the supply/import of such buses is not exempted only the lease is exempted) 18.5 The “time of supply”, i.e the time at which the liability arises, is the earliest of the due date or the date of receipt of rentals. However any advance received will be liable to VAT in the taxable period in which such advance was received. Eg. A lease agreement (for a van) under Finance Leasing Act No.56 of 2000 consist of 26 lease rentals of Rs.20,000/- per month and an advance of an amount equivalent to 10 rentals. i.e Rs.200,000/- to be paid on 01.09.2002. The 26 rentals are to be paid monthly with effect from September 2002. By 30.09.2002 lessee has paid as agreed but by 31.12.2002 he is in arrears of two installments. The leasing company is submitting quarterly returns and an option is available under the agreement to purchase the van for a sum of Rs.75,000/- on termination on of the least. • Generally advance is also treated as a lease installment. Therefore in the VAT period ending on 30.09.2002 we have the advance of 200,000/- and one installment of 20,000/-. The VAT treatment will be as follows:- 102
VAT period ending on 30.09.2002 Type of supply/ Value of supply Rate Tax Payment Rs. Leasing Advance 200,000 10% 20,000 Lease installment(September) 20,000 10% 2,000 22,000 (Please also refer to para 18.15) VAT period ending on 31.12.2002 Type of supply/ Value of supply Rate Tax Payment Rs. Lease installments 20,000x3 60,000 10% 6,000 Although only one installment is paid during this period the lessor (leasing Co.) must declare output tax on accrual basis except in the case of non-performing leases as explained below. No adjustment is due when the arrears are received and if the advances are set off. 18.6 Non-performing leases Cash basis accounting has been allowed for GST for non-performing leases. This approval can be continued to apply for VAT. Non-performing lease means any lease agreement under which six(6) or more consecutive lease rentals are in arrears. In such situations accrual basis as above (para 18.5) can be applied upto the 5 th rental in arrear and from 6 th rental in arrear onwards cash basis can be adopted. The output tax can be declared only when the cash is received. Bad debt relief can be claimed in respect of output tax already paid on accrual basis. 18.7 Interest and other Charges The extra amounts charged under a lease agreement such as penalty charges, penal interest or interest etc. will be considered as part of the rentals and liable to VAT irrespective of the description given to such charges. 18.8 Re-scheduling of lease payments • There is no additional VAT if there is no additional payment. • VAT should be calculated and paid on the new rentals. • If an additional payment is to be made by the lessee VAT should be charged on such additional payment. • Re-scheduled installments (i.e new rentals) are treated as rentals under a new supply (new lease) and VAT should be paid on the full value of the new rentals although part of the arrears under the former lease may be included in the new 103
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But for the best to the September 0
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Preface The Value Added Tax Act was
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Chapter - 1 Introduction 1.1 Purpos
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However from the point of view of t
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The following test which has been a
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iv. Import of any fabric, yarn, gre
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Chapter - 3 The definitions of conc
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Eg. 1 : If “A” wants to termina
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c. Time of supply in relation to su
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Thus, any trade, business, etc. are
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a business in Sri Lanka and not to
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When the recipient is not a registe
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• There are two types of registra
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(ii) continued without making an ap
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(d) (e) (f) input credit has been c
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4.13 Activity Code Number “Suppli
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the H.S. classification it may be b
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5.8 Payment of tax on Assessments T
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5.11. Collection of VAT on Imports
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6.3 Approval For Deferment Facility
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iv. If an importer declares only pa
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6.6 Deferment on Local Supplies (Te
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7.4 Tax Invoice Tax invoice should
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7.11 Use of tax fraction to compute
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Lower Rate - 10% Goods and services
Page 52 and 53: Chapter - 9 Calculation of Tax 9.1
Page 54 and 55: accounted for in respect of all the
Page 56 and 57: transferred to a taxable activity a
Page 58 and 59: Eg. If A is an ice-cream vendor who
Page 60 and 61: (3) In the above case if the regist
Page 62 and 63: • claim (deduct) only the allowab
Page 64 and 65: • “Value of Supply” has to be
Page 66 and 67: VAT chargeable = 900,000 x 20% = 18
Page 68 and 69: • The Director General of Customs
Page 70 and 71: 10.5.6 Milk - item (iv) • Liquid
Page 72 and 73: (i) Insurance - xi(i) • Only the
Page 74 and 75: in Sri Lanka and consumed in Sri La
Page 76 and 77: Chapter - 11 Refunds 11.1 Unlike in
Page 78 and 79: 11.7 Set off of refunds against fut
Page 80 and 81: • To make an additional assessmen
Page 82 and 83: a genuine taxpayer who does not wis
Page 84 and 85: Penalties Tax payers should comply
Page 86 and 87: 15.3 Keeping of records regarding e
Page 88 and 89: 15.8 Example of a VAT Account VAT A
Page 90 and 91: the trading house or the other pers
Page 92 and 93: 16.4 Concessions available to Expor
Page 94 and 95: v. Importation of services are not
Page 96 and 97: Chapter - 17 Hire Purchase Transact
Page 98 and 99: (a) Under the existing provisions V
Page 100 and 101: y the hire-purchase company to the
Page 104 and 105: installments. Any VAT not recovered
Page 106 and 107: 18.13 Leasing inputs • Leasing in
Page 108 and 109: 18.15 Leasing Advance Sometimes it
Page 110 and 111: Thus output tax of B on the termina
Page 112 and 113: Chapter - 19 Mortgages 19.1 Mortgag
Page 114 and 115: • Services provided by internatio
Page 116 and 117: Chapter - 21 Some Obligations Under
Page 118 and 119: However an adjusted figure must be
Page 120 and 121: Chapter 23 Construction Contracts 2
Page 122 and 123: Government agencies mentioned above
Page 124 and 125: Chapter - 24 Rulings 24.1 Following
Page 126 and 127: • None of the companies covered b
Page 128 and 129: which he has supplied to the garage
Page 130 and 131: instructions can be exempted if suc
Page 132 and 133: ii. iii. any other registration tha
Page 134 and 135: i. Membership fees and or subscript
Page 136 and 137: Chapter - 25 Zero Rated Supplies 25
Page 138 and 139: (ii) (iii) (iv) Services directly c
Page 140 and 141: Supply of facilities for crew chang
Page 142 and 143: 4. Yard to Port Transporting contai
Page 144 and 145: Chapter - 26 Travel Trade, Tourism
Page 146 and 147: ii. iii. But “travel insurance“
Page 148 and 149: 26.6 VAT ON MICE Tourism VAT rate a
Page 150 and 151: x. Supply of goods & vehicles free
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and for VAT purposes the two compon
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(i.e the lottery organizer) on whic
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The VAT charged on above should be
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1.2.3 Other imported materials exce
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The sub-contract awarder should pay
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2.3.1 Imported goods (except fabric
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5.2.2 To BOI garment manufacturing
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Annexure - 2 First Schedule to the
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4. Supply of any services to any Di
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Services 1. Electricity more than 3
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Sale before 01.08.2002 - GST Regime
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GST = (CIF + CD + Surcharge + Ex.Sp
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to indicate the date of payment of
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The period within which the Board o
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Mrs. S.N.P. Abrew - Senior Assessor
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