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

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Chapter - 3 The definitions of concepts 3.1 In order to implement VAT it is necessary to understand the meanings of the terms and concepts employed in VAT Law. The terms and concepts as already indicated in paras 2.1 and 2.2 are defined in Sections 4,.5 and 83 of the Act as given below. 3.2 Supply of goods Means • passing of exclusive ownership of goods to another person, • By the owner of such goods or • By another person under the authority of any written law This includes among others - sale of goods by public auction - sale of goods in satisfaction of a debt - transfer of goods from a taxable activity to a non-taxable activity. - Transfer of goods under a hire- purchase agreement “Goods” means all kinds or movable or immovable property but does not includes money) i ii. Currency Notes & Coins :- According to Monetary Law currency Notes & Coins become legal tender only when they are recorded and issued for circulation. Thus import of notes and coins is not import of money but import of goods. Their value is not their face value but the cost. Supply of goods on Tender Agreements - is also covered by the above definition of “supply of goods”. A tenderer may (a) supply goods manufactured by him (b) supply goods which he purchases solely for the purpose of supply under tender agreements (c) supply goods in the course of a retail or wholesale business carried on by him. In all three situations he is supplying specific goods to a specific person at a specific time at a specified price and passing of exclusive ownership to another person by the owner of the goods is present (in all situations). Thus it is liable to VAT in all situations and the supply on tender does not, by itself, amounts to a retail or wholesale business which is excluded from VAT as envisaged Section 3 of the Act (Vide Para 2.4.2). In situation (c ) above the tenderer is also liable to provincial turnover tax in addition to VAT. (Pleas see discussion in para 4.6) 14
iii. Passing of Exclusive ownership of goods : What is meant by passing of exclusive ownership of goods is not defined in the Act. It can be construed to mean absolute transfer of goods involving both title and possession. If both the title and possession are passed then it amounts to a “supply of goods”. If only the possession is passed, as in the case of a lease of movable property or hire of goods, that does not amount to supply of goods. (By definition in Sec. 83 any supply which is not a supply of goods is a supply of service. Thus, lease & hire belong to that category (as explained below) but a hire-purchase credit sale or a conditional sale amounts to a supply of goods because both the title and possession is transferred to the purchaser under a hire- purchase conditional sale or credit sale. iv. Sale of goods by an importer of such goods:- is also not treated as an excluded supply by definition in section 3. Thus the sale of goods by an importer of such goods is liable to VAT and in addition, it is liable to provincial turnover tax as well, if the importer is supplying such goods in the course of a retail or wholesale business. v. Public Auction:- Supply of goods also include, by definition, sale of goods by public auction. Sale by public auction is governed by different laws and is different from a retail or a wholesale sale. vi. Deemed Supply of goods - The Act also provide for “deemed supply of goods”. This occurs when the registration of a registered person is cancelled. Sec. 16(5). Vide Para 4.8 (c ). Appropriation of business goods for private purposes and gift of business goods to other persons tantamounts to deemed supply of goods in view of Section 5(5)(iv) (by virtue of the definition of “taxable supply” in section 83 any supply of goods or services made or deemed to have been made is treated as a taxable supply). vii. Sale of lands and buildings, sale of houses & buildings on rent purchase terms, Transfer of goods or assets of a business permanently for private use, repossession of goods sold under hire-purchase conditional sale agreement due to default of installments and exchange of goods are some other examples of “supply of goods”. 3.3 Supply of Services Means • any supply which is not a supply of goods • but includes any loss incurred in a taxable activity for which an indemnity is due. 15
Page 1 and 2: But for the best to the September 0
Page 3: Preface The Value Added Tax Act was
Page 6 and 7: Chapter - 1 Introduction 1.1 Purpos
Page 8 and 9: However from the point of view of t
Page 10 and 11: The following test which has been a
Page 12 and 13: iv. Import of any fabric, yarn, gre
Page 16 and 17: Eg. 1 : If “A” wants to termina
Page 18 and 19: c. Time of supply in relation to su
Page 20 and 21: Thus, any trade, business, etc. are
Page 22 and 23: a business in Sri Lanka and not to
Page 24 and 25: When the recipient is not a registe
Page 26 and 27: • There are two types of registra
Page 28 and 29: (ii) continued without making an ap
Page 30 and 31: (d) (e) (f) input credit has been c
Page 32 and 33: 4.13 Activity Code Number “Suppli
Page 34 and 35: the H.S. classification it may be b
Page 36 and 37: 5.8 Payment of tax on Assessments T
Page 38 and 39: 5.11. Collection of VAT on Imports
Page 40 and 41: 6.3 Approval For Deferment Facility
Page 42 and 43: iv. If an importer declares only pa
Page 44 and 45: 6.6 Deferment on Local Supplies (Te
Page 46 and 47: 7.4 Tax Invoice Tax invoice should
Page 48 and 49: 7.11 Use of tax fraction to compute
Page 50 and 51: 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
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• “Value of Supply” has to be
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VAT chargeable = 900,000 x 20% = 18
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• The Director General of Customs
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10.5.6 Milk - item (iv) • Liquid
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(i) Insurance - xi(i) • Only the
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in Sri Lanka and consumed in Sri La
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Chapter - 11 Refunds 11.1 Unlike in
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11.7 Set off of refunds against fut
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• To make an additional assessmen
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a genuine taxpayer who does not wis
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Penalties Tax payers should comply
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15.3 Keeping of records regarding e
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15.8 Example of a VAT Account VAT A
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the trading house or the other pers
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16.4 Concessions available to Expor
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v. Importation of services are not
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Chapter - 17 Hire Purchase Transact
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(a) Under the existing provisions V
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y the hire-purchase company to the
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Chapter - 18 Leasing & VAT 18.1 Lea
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installments. Any VAT not recovered
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18.13 Leasing inputs • Leasing in
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18.15 Leasing Advance Sometimes it
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Thus output tax of B on the termina
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Chapter - 19 Mortgages 19.1 Mortgag
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• Services provided by internatio
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Chapter - 21 Some Obligations Under
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However an adjusted figure must be
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Chapter 23 Construction Contracts 2
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Government agencies mentioned above
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Chapter - 24 Rulings 24.1 Following
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• None of the companies covered b
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which he has supplied to the garage
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instructions can be exempted if suc
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ii. iii. any other registration tha
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i. Membership fees and or subscript
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Chapter - 25 Zero Rated Supplies 25
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(ii) (iii) (iv) Services directly c
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Supply of facilities for crew chang
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4. Yard to Port Transporting contai
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Chapter - 26 Travel Trade, Tourism
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ii. iii. But “travel insurance“
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26.6 VAT ON MICE Tourism VAT rate a
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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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182
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VAT Guide to Value Added Tax - sri lanka inland revenue ...

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