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

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installments. Any VAT not recovered under the former lease amounts to bad debt. 18.9 Termination of a lease • As explained in para 3.8(8) if the payment made by the lessee at the end of the lease period, to acquire asset is less than 10% of the total amount payable under the lease agreement then the final payment made for the purpose of acquiring the asset is considered as another lease installment. Value of supply = last payment, Rate = rate applicable to the particular lease. • If the final payment charged is more than 10%, then it will be considered as a “separate supply of goods”. VAT will be charged on the value of supply acquired. Value of supply = the amount paid to acquire the asset. The rate of VAT is the rate applicable to “supply of goods”. If it is a car or van or motor cycle it is liable at 20%. If it is a passenger bus with 28 or more passenger seats or a refrigerator it is liable at 10%. • Eg: 1 - In the above example (para 18.5) the total amount payable under the lease is 200,000 + 26 x 20,000 = 720,000. At the end of the lease the amount payable to acquire the asset is 75,000/-. It is more than 10% of the total and it is considered as a supply of a van for 75,000/-. Thus the VAT payable is 75,000 @ 20% = 15,000/-. If the final amount payable is 50,000/- then it is subject to VAT as another leasing installment ie. 50,000/- @ 10% = 5,000/-. (if the lease is not under Finance Leasing Act No.56 of 2000 then the lease installments are also taxed at 20% - operating leases may fall into this category) • Premature Termination Eg.2 – If the lessee wants to terminate the lease at the end of the 18 th installment and acquire the van an if the lessor agrees to transfer the van for a payment equivalent to balance eight (8) installments plus an additional sum of 25,000/- then the amount payable to acquire the lorry is 20,000x8+ 25,000 = 185,000/- This is not treated as payment of leasing installments in advance because the lease comes to an end after 18 months and a separate transaction begins. The total amount paid under the lease is 200,000 + 18 x 20,000 = 560,000/-. As 185,000 is greater than 10% of 560,000 this is treated as a supply of van for 185,000/- and VAT payable by the lessee is 185,000/- @ 20% = 37,500/-. This is output tax in the hands of the lessor and input tax in the hands of the lessee. If the final payment was less than 10% of 560,000/- then it is treated as another leasing installment and taxed at the rate applicable to the lease. This case being a lease under Finance leasing Act the rate is 10%. 104
18.10. Re-possession of the leased asset. • If the asset is re-possessed by the lessor there will be no VAT liability because the leasing company is the owner of the asset. • Any sale of re-possessed goods amounts to a separate supply of “supply of goods ‘and any’ re-lease” amounts to a new lease. • Sale proceeds of the repossessed asset should be first set off against the VAT payable on the arrears of installments. The balance should be set-off against VAT payable on the sale. 18.11 Termination due to damage etc. • If the asset given on lease becomes unusable due to damage or some other reason and the lease agreement is terminated on that grounds there is no VAT due on such termination because it does not amount to a separate supply. This is a termination by returning the unusable goods. • If there are any arrears of lease installments at the time of termination the lessee has to pay VAT on such arrears. • If the returned asset is unusable to the extent that it cannot any more be considered as part of the (leasing) stock then the lessor should consider it as a “disposal of goods” and VAT must be paid on the value of disposal i.e the market value if any. • If any insurance or indemnity is received then out put tax must be declared on such receipt. If the indemnity is on a total loss then the out put tax payable is not on the market value but on the insurance claim . The VAT on the insurance claim is paid to the lessor by the insurance company. (please see examples given in para 3.3). 18.12 Removals from leasing stock • If the goods to be given on lease (leasing stock) is used for other purposes such as renting, given on loan, use of the asset in other projects and private use etc. such transfers can be treated as disposals depending on the circumstances. Then there is no lease but a different kind of a supply takes place. The amount received for that supply or the market value of the goods as the case may be should be treated as the value of supply. 105
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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
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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 102 and 103: Chapter - 18 Leasing & VAT 18.1 Lea
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
Page 152 and 153: 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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