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

consequence of that law did not change. In the circumstances the question of
Provincial Council turnover tax will not arise unless the existence of a separate
business of retail and wholesale sales is established)
• But in the case of air –travel, the in flight catering service is considered as an
integral part of the supply of passenger transport service by air. The reason is
unlike in the case of bank loans where the customer (i.e. the recipient of the
supply) is billed after the occurrence of each event (ie each supply) the air
passenger pays in advance for one composite service. The price paid in
advance for the air ticket includes in flight catering services that are provided in
that particular air line. If the supply of liquor etc. are separately charged then it
amounts to a separate supply.
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Sweep Ticket Agents - Sweep tickets are not sold as goods or commodities and
the sale of sweep tickets are not governed by the Sale of Goods Ordinance.
The ticket is only a token for the buyer to participate in a (lottery) draw conducted
by the lottery organizer. The agent may sell on a commission basis, the tickets
belonging to the lottery organizer or sometimes for business convenience he (the
agent) may be asked to purchase the tickets outright at a discounted price with
no right to return the unsold tickets. In the latter case the agent is doing buying
and selling sweep tickets but it is debatable whether he does retail and wholesale
business with sweep tickets because on one hand they are not sold as goods or
commodities and on the other hand the stocks will have no value and are not
salable after the draw. The purpose of the sale is not to sell sweep tickets as
a commodity (such as printed material or toilet paper) but to sell them as
permits to enter into the draw. After the draw people throw away the tickets if
there is no prize. Therefore the sale of sweep tickets is not an excluded supply,
consisting of retail or wholesale supply of goods, as envisaged in Section 3 of the
Act. The agent is supplying a service to the lottery organizer whether he buy and
sell tickets or whether he sells them on commission basis (The service is the
enrollment of clients for the draw). In the former case he is allowed to keep a predetermined
margin and re-sell the tickets and in the latter case he is allowed to
retain an agreed commission on the final sale value. The margin kept by the
agent or the commission retained by him as the case may be, is the “value of
supply” by the agent to the principle. The department’s view is that VAT is
chargeable on the margin kept by the agent or the commission retained by him,
which is the consideration for the supply of service by the agent to the principle
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