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

i. Membership fees and or subscriptions
ii. Sale of books, journals and magazines; any royalties and other miscellaneous
income.
The exempt educational services will be restricted to
(a) student membership fees,
(b) examination fees and tuition fees
24.19. Premature termination of lease in the case of coaches used in public passenger
transport services
If the coach has more than 28 seats the leasing company is not entitled to input credit in
relation to purchase of the coach because lease installments are exempt from VAT.
When the lease is terminated within 3 years the leasing company is required to charge
VAT on the amount payable (by the lessee) to acquire the coach if such amount exceeds
10% of the total amount payable under the lease. In such situations therefore both the
purchase and sale (of the coach) are liable to VAT while no input credit is allowed in
respect of VAT paid on the purchase value. In order to overcome the cascading effect
that may arise due to this treatment the leasing company will be allowed input credit on
the basis of the following formula.
Input credit allowable = ( Actual input tax paid) x Unexpired lease
period
Total lease period
(Please see Ex. 2 in para 18.17)
24.20 Structured leasing
Certain leasing companies allow the lessees to pay leasing installments on a seasonal
basis in cases where the lessee’s income is seasonal and not regular. For example
farmers engaged in paddy cultivation do not have regular income. Their income is
seasonal. Some leasing companies allow leasing installments in respect of leased
tractors to be paid during the seasons only. In order to do this they either fix large lease
installments for the seasons by allowing grace periods in between the seasons or allow
the lease installments during the off seasons to go into arrears without any penalty so
that such arrears can be paid during the seasons. This type of leasing, which is known
as structured leasing, too should be subject to VAT in the same manner as other leases.
Any advance should not be treated as a leasing installment. Large installments or
amounts paid during the seasons can be treated as normal installments. Any amount
payable in order to purchase the asset at the termination of the lease should be treated
as a separate transaction if such amount exceeds 10% of the total amount payable under
the lease. If the asset is transferred on the payment of the last installment, that
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