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

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Thus, any trade, business, etc. are considered as taxable activities. It is important to note that the profit motive is not an essential ingredient of a “taxable activity”. The essential characteristic of a taxable activity is that the activity must be concerned with making (taxable) supplies for a consideration. Thus the supply of goods and services for a consideration by a social service or charitable organization is considered as a business and in turn as a taxable activity although the presence of a profit motive may not be there and the consideration charged may be barely sufficient to recover the costs. The consideration may be in money or otherwise than in money. However any activity for pleasure and social enjoyment is not regarded as a taxable activity although such an activity may have all the attributes of a business. Eg. A group of friends contributing towards the expenses of a picnic; the contributions are not regarded as considerations for supplies made in the course of carrying on or carrying out a taxable activity. Examples Q - I sold a block of land which I received sometime back as dowry. Am I required to charge VAT on the sale price? A - In order to charge VAT you must be a Registered Person and the sale must be in the course of carrying on or carrying out a taxable activity. As per facts given above it is not in the course of carrying on a taxable activity. Therefore VAT is not chargeable. However, if the circumstances surrounding the sale are such that the sale can be treated as an adventure in the nature of a trade then it becomes a taxable activity and you are liable to charge VAT on the sale value, if you are a Registered Person. You may not be a registered person prior to the sale but you may become liable to be registered with the sale if the intended sale price exceeds Rs. 500,000/-. In such cases you are required to obtain a Registration prior to the sale. Q - I am a registered person and I sold my car used in the business activity. Is the sale liable to VAT. A - Yes. It is in the course of carrying out a taxable activity and liable to VAT. Q - I am a registered person and I sold the scrap in my business. Is it liable to VAT A - Yes, for the same reasons as above. A contract of employment is not a “taxable activity”, i.e a job where a person receives salary or wages. But a contract for service is a taxable activity. Eg. An accountant who 20
is appointed as a director of a company because of his taxable activity as an accountant and receives directors fees. The fee is treated as a consideration for supply of service in the course of carrying on or carrying out his “taxable activity” as an accountant. Such a directors fee is not excluded from VAT. If the fees or the value of taxable supplies made by the director exceeds the threshold he should register for VAT and charge VAT to the company. The company should pay VAT to the director in addition to the fees. Q. A person grows anthuriam as a hobby. Occasionally he sells flowers and the total sales per annum is the range of Rs.10,000/- . A. This is a recreational pursuit and not a taxable activity. Q. A person is collecting stamps and coins and belongs to a club for this. Occasionally he sells some of these items and enters into barter transactions with other members of the club. A It is more than likely that the activity is carried on as a hobby. It is therefore not a taxable activity. However if he embarks upon an adventure in the nature of a trade with such collections then it becomes a taxable activity. The meaning of ‘adventure in the nature of trade’ is the same as the meaning under the Inland Revenue Act as decided by Courts. ii. The place of Taxable Activity/Place of business The place of business or the taxable activity is as important as the taxable activity itself because VAT is charged. i. on the supply of goods and services ii. In the course of carrying or carrying out a taxable activity in Sri Lanka. Section 2(1) of the Act. By virtue of Section 9, Goods or Services shall be deemed to be supplied in Sri Lanka;. (a) if the supplier carries on or carries out the taxable activity in Sri Lanka, and (b) Goods are in Sri Lanka at the time of supply or (c) Services are performed in Sri Lanka by the supplier or his agent. Thus if a person in Sri Lanka is supplying services to another business in Sri Lanka such services are liable to VAT irrespective of the fact that the business which receives the supply of service may be carried on by a person outside Sri Lanka. The supplier is in Sri Lanka, he is carrying on or carrying out a taxable activity in Sri Lanka and the supply is made or service is rendered to 21
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 14 and 15: Chapter - 3 The definitions of conc
Page 16 and 17: Eg. 1 : If “A” wants to termina
Page 18 and 19: c. Time of supply in relation to su
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
Page 64 and 65: • “Value of Supply” has to be
Page 66 and 67: VAT chargeable = 900,000 x 20% = 18
Page 68 and 69: • The Director General of Customs
Page 70 and 71:
10.5.6 Milk - item (iv) • Liquid
Page 72 and 73:
(i) Insurance - xi(i) • Only the
Page 74 and 75:
in Sri Lanka and consumed in Sri La
Page 76 and 77:
Chapter - 11 Refunds 11.1 Unlike in
Page 78 and 79:
11.7 Set off of refunds against fut
Page 80 and 81:
• To make an additional assessmen
Page 82 and 83:
a genuine taxpayer who does not wis
Page 84 and 85:
Penalties Tax payers should comply
Page 86 and 87:
15.3 Keeping of records regarding e
Page 88 and 89:
15.8 Example of a VAT Account VAT A
Page 90 and 91:
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
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• None of the companies covered b
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which he has supplied to the garage
Page 130 and 131:
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
Page 136 and 137:
Chapter - 25 Zero Rated Supplies 25
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(ii) (iii) (iv) Services directly c
Page 140 and 141:
Supply of facilities for crew chang
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4. Yard to Port Transporting contai
Page 144 and 145:
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
Page 158 and 159:
1.2.3 Other imported materials exce
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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
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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
Page 180 and 181:
Mrs. S.N.P. Abrew - Senior Assessor
Page 182:
182
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