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

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GST = (CIF + CD + Surcharge + Ex.Spl.Duty +Cess) x 12.5% = (100 + 10 + 10 + 0 + )) x 12.5 100 = 15 and NSL = (CIF + CD) x 1.25 x 6.5% = (100 + 10) 125 x 6.5 100 100 = 8.93 and the effective rate = 15 + 8.93 = 23.93% (c) When the Customs Duty is = 35%, it can be seen that, GST = 18.12, NSL = 10.96 and therefore the effective rate is 29.08% (d) Under the VAT regime too VAT payable on imports can be calculated when CD = 10%, 25% or 35% by using the formula VAT = (CIF + CD+ Ex.Spl.Duty + Cess) 10% or 20% as the case may be the relevant values are given in the following table in respect of goods for which excise (Special Provisions) Duty and Cess Duty are not applicable. Effective rate as a % of CIF Customs Duty % 10 (12.5%) GST % CIF 15 (6.5%) NSL % CIF 8.93 GST + NSL % CIF 23.93 ( 10%) VAT % CIF 11 (20%) VAT % CIF 22 25 16.87 10.15 27.02 12.50 25 35 18.12 10.96 29.08 13.50 27 v. VAT Rates Subject to few exceptions • 20% rate has been fixed for the goods which were earlier liable to both GST (12.5%) and NSL (6.5%) such as telecommunication services, electrical goods, motor vehicles, • 10% rate has been fixed for goods which were earlier liable either only to GST (eg. Supply of electricity, leasing and transport) or only to NSL (Eg. Bread, Milk, Sugar) • Introduction of only one indirect tax (VAT) instead of two taxes (GST & NSL) in respect of the same transaction has simplified to some extent the tax base and the tax structure relating to indirect taxes administered by the CGIR. 174
Appendix – 2 Income Treatment of VAT Income Tax is charged on profits and income. In computing profits of any trade, business, profession or vocation, the expenditure as well as the income, consist of payments and receipts which include VAT. If the person whose profits are computed is a Registered Person for VAT then such person is entitled to deduct VAT included in the supplies used by him (i.e input tax) from the VAT charged and collected by him (i.e output tax) on behalf of the government and the therefore VAT does not form part of his cost as explained in the example in Appendix– 1. Inland Revenue Act recognizes this principle and in the circumstances a VAT registered person is not entitle to i. deduct VAT (i.e input tax) included in the expenses incurred in the production of income in computing the profits – Sec. 24(I)(v) of the Inland Rev. Act, and ii. deduct VAT (input tax) included in the capital assets in computing depreciation etc. – Sec. 23(7)(f)(iv) Similarly, iii. iv. The output tax included in the supplies (i.e sales) made by such person is not part of his turnover, and The output tax included in the disposal of capital assets will not be treated as part of the sale proceeds -–Sec. 23(7)(c ) However adjustments are due in respect of disallowable VAT such as VAT paid on expenses relating to motor vehicles etc. As the registered person is not entitle recover such VAT, such amounts will be treated as part of his cost. Adjustments are also due in relation to bad debts written off and bad debts recovered. The VAT element in such amounts should be excluded. There may also be situations where only a part of the supplies are taxable. In such cases the input tax is either apportioned or will be allowed only to the extent that input tax is directly attributable to the taxable supplies. The amount of input tax that is not allowed for VAT purposes will be treated as part of the cost for income tax purposes. The “VAT Account” which is required to be maintained under Sec. 64(I) of the VAT Act by a registered person (as stated in para 15.6) is a useful record which can be used to make these adjustments. In the ‘Input Tax VAT Account”, they can provide a separate columns 175
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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
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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
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 142 and 143: 4. Yard to Port Transporting contai
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 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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