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

accounted for in respect of all the goods and assets on which input tax has
been claimed. [Section 16(5)]
• A separate record should be maintained in respect of GST tax declared as
0output tax in VAT returns. (Para 22.1.2) A separate record should also be
maintained in respect of supplies made without output tax to Diplomatic
personnel (Vide Chapter 20)
• When fringe benefits are made to employees, output tax should be paid by the
employer on the value of supply. (The supplier is the employer). If an
employee’s private bill (say a hotel bill) is settled by the employer, the employer
should pay VAT on that amount. The bill cannot be a “tax invoice” as the
employee is obtaining the service (or buying goods) as a private individual and
not as a registered person. But that bill may be a VAT inclusive bill or a bill
without VAT depending on whether the supplier is registered or not. In either
case the employer is required to pay VAT on that payment (i.e the value of
supply) at 10% or 20% depending on the type of supply. If it is a hotel bill it is a
service liable at 10%. If it is a bill pertaining to the purchase of a television it is
liable as a supply of goods at 20%. The employer cannot claim input tax
included in such invoicesa.
9.4 Input tax
Input tax is the VAT payable by a registered person;
(a) To another registered person - in respect of goods and services obtained from
such person to be used in a taxable activity and
(b) To the Customs - in respect of goods imported to be used in a taxable activity.
(Garments purchased from a BOI manufacturer cum exporter with the special approval of DGC/BOI
at a special duty of Rs.25/- per piece paid to Customs is also treated as an import)
9.4.1 Special rules regarding input tax
Mixed activities - Where a supply of goods or services received by a registered
person, or goods imported are used or are to be used partly for the purpose of
taxable activity the input tax shall be claimed proportionately except in the case
(iv) below.
ii.
Finance Leasing - In the case of a person providing leasing facilities under the
Finance Leasing Act No. 56 of 2000, the input tax on Goods supplied under a
leasing agreement for a period less than 3 years shall be counted at the rate of
10% even if the tax paid on such goods is more than 10%(Vide Para 18.13.3).
iii.
Tenants - Where an unregistered person leases out his land and buildings in
terms of a tenancy agreement, to a registered person, input tax is allowed to be
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