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

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the H.S. classification it may be brought to the notice of the DGC and CGIR for necessary amendments. Sometimes there may be difficulties in identifying goods as declared in import documents. For example the VAT Act speaks of laboratory reagents, raw materials used for pharmaceutical products, medical instruments, semi-precious stones etc. But the individual names of these reagents, products, instruments and stones may not be appearing in the H.S. Code or may be appearing under inappropriate H.S. headings so that is it difficult to decide on the VAT rate applicable to a particular item that is imported. In such situations CGIR will give directions to the Customs, with regard to the rate of VAT applicable after identifying the items on the basis of expert opinion and/or recommendations and other material placed before him. Such recommendations are obtained solely for the purpose of identifying the goods only (Please see para 10.3) Once the goods are properly identified the rate of VAT will be decided in accordance with the VAT Act eventhough an incorrect rate may appear in the H.S. Code due to inadvertence or inadequacy in classification. However the valuation for the purpose of calculating VAT is the responsibility of the D.G.C as the valuation depends on the C.I.F Value. Even if the goods are imported on N.F.E basis and even if the goods are exempted from Customs duty, the C.I.F will be ascertained by the Customs in accordance with the Customs Ordinance for the purpose of calculating VAT and other levies. Importers are advised to verify the VAT rates (and exemptions) applicable to their intended imports beforehand from the H.S. Code Guide in order to avoid any repercussions that may arise after import. • VAT on approved local sales of garments by BOI exporters is also collected from the buyers by the Customs at Rs. 25/- per piece in the same manner as in the case of imports 5.1.3 Exempt supplies VAT is not collected on exempt supplies of goods & services. List of exempt supplies are given in Schedule 1 to the VAT Act. Please see Chapter 10.. 5.2 Payment of VAT to C.G.I.R As stated in para 2.5 VAT is paid in the first instance by the consumers to the Registered Persons from whom they purchase goods & services. Thereafter the Registered persons are required to remit the VAT collected by them to the Commissioner General of Inland Revenue as provided in Section 22 of the Act. That Section allows the Registered Persons to deduct the VAT paid by them on the goods and services used by them 34
in making the taxable supplies from the amount charged and collected by them - Section 22(1) Thus it is the responsibility of the Registered Person to charge and collect VAT on behalf of the C.G.I.R and to pay and account for such collections to the CGIR. 5.3 Payments dates Registered Persons are required to pay the VAT collected/Collectible in respect of a taxable period within one month form the end of the taxable period. 5.4 Penalty for default – Sec. 27(1) Late payment will attract following penalties. (a) 10% of the amount not paid, plus (b) 2% of that amount for each month or part thereof subject to a maximum of 100% of the amount in default. 5.5 Where to pay ? Payment must be made to one of the assigned branches of the bank of Ceylon. -Vide Para 8.7 5.6 Recovery of tax Non payment of VAT collected from consumers is an offence against which criminal proceedings can be initiated. Commissioner General can take one or more of the following actions against any person who has collected VAT from the consumers but not remitted it to the C.G.I.R. i. Seizure and sale of movable property – Sec. 42(1) ii. Distraint Action - Seize and sell any immovable property of the defaulter after obtaining writ of execution from the District Court- Sec. 42(6). iii. Institute proceedings for recovery before a Magistrate. – Sec. 43(1) iv. Garnishee Action - Recover the tax from the debtors of the defaulter or by seizure of his bank accounts – Sec. 44(1) 5.7 Directors liability when the company defaults When a body corporate has not paid any tax (VAT) on or before the due date, the manager, director, secretary or any other principle officer of such body is personally liable to pay the tax, as if he is the ‘defaulter’ unless he proves to the satisfaction of the CGIR that he is not responsible for such default (Sec. 48). This is applicable to partners of a partnership as well- Sec. 48(2) . Vide para 12.5. Directors of a company are also liable to pay unpaid VAT of a company under liquation unless it is proved that the default cannot be attributed to gross neglect, breach of duty etc. on the pat of the director in relation to the affairs of the company. Sec. 57(1). 35
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 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 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
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v. Importation of services are not
Page 96 and 97:
Chapter - 17 Hire Purchase Transact
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(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
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18.13 Leasing inputs • Leasing in
Page 108 and 109:
18.15 Leasing Advance Sometimes it
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Thus output tax of B on the termina
Page 112 and 113:
Chapter - 19 Mortgages 19.1 Mortgag
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• 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
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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
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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
Page 136 and 137:
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
Page 164 and 165:
5.2.2 To BOI garment manufacturing
Page 166 and 167:
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
Page 182:
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