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

Taxable Period (month) October 2002
B - Bank B’s output tax on the leasing advance = 300,000 @ 20%
= 60,000/-.
provided the leasing advance is treated as a separate supply which is different from leasing
installments and as a supply liable to VAT as indicated in para 18.15.
B - Banks output tax on leasing installment = NIL
(because leasing installments are exempt from VAT in the case of a passenger bus with more than
28 seats).
Taxable Period ending 31.12.2002
C - The transporter C’s input tax on the leasing advance 60,000/- is not allowed
because he uses the bus in an exempt activity.
Taxable period (month) ending October 2004
B - No implications
C - Quarterly taxpayer – no implications till December
D - Quarterly tax payer – same
Taxable Period ending 31 December 2004
C - Tax invoice from C to insurance company D on the
Insurance claim:
Value of supply = 350,000
VAT = 70,000
Total = 420,000
∴output tax of C on the insurance claim = 70,000/-
(because insurance claim is liable to VAT at 20%.)
D - Input tax of D on the insurance claim = 70,000/-
B- Bank B the absolute owner of the bus and the assignee of the insurance policy who
forwards the insurance claim on behalf of C can recover the lease arrears from August
2003 to November 2004 which is = 16 x 25,000/- = 400,000/-. But the amount of the claim
is not sufficient to recover this amount because insurance claim is only 350,000/-. The
VAT Rs.70,000/- belongs to C. Thus C has to pocket out the balance 50,000/- in order to
settle the arrears.
Taxable Period (month) ending 28.02.2005
B - Bank B must charge VAT on the disposal of bus because the amount payable to buy the
bus which is Rs.892,500/- is more than 10% of the total amount payable under the lease
which is 10% of 2,100,000/- = 210,000/-
∴ Rs.892,500/- is not treated as another leasing installment.
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