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

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4. Yard to Port Transporting containers belonging to the Shipping lines Shipping line/ and Vice-Versa between port and yard Agent Zero rated 5. Yard to Yard Transporting containers from yard to yard Shipping line/ Zero rated Agent If billed to a third party - Standard rated Note: If a third party has provided the trucking service to the relevant person (importer/exporter/freight forwarder etc.) such supply will be standard rated. N.B. i. Entry permit fees, vehicle parking fees, landing and parking fees(domestic), rentals & concessions and other miscellaneous charges imposed by the Airport and Aviation Department are liable to VAT. ii. The services provided by off line carriers (i.e Air lines and ships) which do not call at any part in Sri Lanka but provided services via an agent in Sri Lanka being services provided outside Sri Lanka are exempted. The agents commission too is exempted. iii. In the above mentioned situations discussed under Section 7(1)(b) it can be observed that in many cases the contract of service (whether in relation to property outside Sri Lanka or in relation to other matters outside Sri Lanka) may be concluded in Sri Lanka while the service is utilized outside Sri Lanka. The zero-rating or other matters connected to a “supply” is not determined on the basis of the place where the contract is concluded to provide the supply. 25.6 i. Provision of Services in Sri Lanka to be consumed outside Sri Lanka Section 7(1)(b)(v), (vi) and (vii) all deal with provision of services in Sri Lanka to be consumed outside Sri Lanka for which payment is received in foreign currency through a bank. Comments made under para 10.5.14 are also applicable here. The difference is that, under zero rating the payment should be in foreign currency through a bank whereas under exemption the payment should be in local currency or foreign currency but not through a bank. ii. Special mention should be made about sub- section 7(1)(b)(vii) because it is stated in general terms while the other sub-sections enumerate specific situations where the services provided in Sri Lanka are utilized outside Sri Lanka. The scope of Section; 7(1)(b) is clear from all the other sub-sections and Sub- Section 7(1)(b)(vii) cannot be extended to cover different situations. For instance if the supply of a service originates in Sri Lanka and finally such service is utilized in the course of carrying on or carrying out a business in Sri Lanka by a foreign principle then such service is not treated as consumed outside Sri Lanka even though the decisions to accept or reject the service may be taken at the head office in a foreign country. Under Section 7(1)(b)(vii) what is material is the actual place of business in the course of carrying on carrying 142
out of which, the services are in fact utilized. That means the (place of the business) where such services are in fact utilized is as important as the place of the taxable activity from where the services are originated but not the place where the decisions are taken on behalf of that business which utilizes the services. In other words the place where the contract is concluded to accept the services is not material. It may also be useful to quote from a foreign judgement with regard to the concept of supply in Value Added Tax. “The concept of making a supply for purposes of VAT is not identical with the performance of an obligation for the purpose of law of contracts even where the obligation consist in the provision of goods and services” ϒ Thus the commission paid in foreign currency to a Sri Lankan agent by a foreign principle for canvassing orders and other connected activities in Sri Lanka in the course of carrying on or carrying out a business in Sri Lanka by that foreign principle, does not tantamount to a payment for services supplied in Sri Lanka to be consumed outside Sri Lanka for the purpose of zero-rating as envisaged in sub-section 7 (1) (b)(vii) of the Act. The services consumed outside Sri Lanka as envisaged in that –sub-section should be consumed in a manner similar to the consumption of services mentioned in other sub-sections, specially subsection(v) and sub-section ( vi) . What matters is the actual place of consumption of services and not the place where the decisions are taken. Please see para 10.5.14 The commission is paid on the basis of volume of business transacted in Sri Lanka with the help of a an agent in Sri Lanka and the business is transacted in Sri Lanka as a result of the services performed in Sri Lanka ; then the services are treated as being consumed in Sri Lanka . The presence of an agent or representative in Sri Lanka, to supply services makes things completely different from a situation where business is transacted by other means such as internet. The services of the agent in Sri Lanka falls within either Section 9 or Section 55 of the Act depending on the facts of the case. ϒ Laws J. in Customs & Excise Commissioners V. Reed Personnel Services (1995) STC. 588 143
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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
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accounted for in respect of all the
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transferred to a taxable activity a
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Eg. If A is an ice-cream vendor who
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(3) In the above case if the regist
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• 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
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 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 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
Page 154 and 155: (i.e the lottery organizer) on whic
Page 156 and 157: The VAT charged on above should be
Page 158 and 159: 1.2.3 Other imported materials exce
Page 160 and 161: The sub-contract awarder should pay
Page 162 and 163: 2.3.1 Imported goods (except fabric
Page 164 and 165: 5.2.2 To BOI garment manufacturing
Page 166 and 167: Annexure - 2 First Schedule to the
Page 168 and 169: 4. Supply of any services to any Di
Page 170 and 171: Services 1. Electricity more than 3
Page 172 and 173: Sale before 01.08.2002 - GST Regime
Page 174 and 175: GST = (CIF + CD + Surcharge + Ex.Sp
Page 176 and 177: to indicate the date of payment of
Page 178 and 179: The period within which the Board o
Page 180 and 181: Mrs. S.N.P. Abrew - Senior Assessor
Page 182: 182
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