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

• claim (deduct) only the allowable portion in cage 5
ie (84,000 + input tax attributable to business running expenditure = 84,000 +
1 X 70 x 60,000 = 91,000)
6 100
(Some countries make an adjustment of output tax as well with regard to private use i.e
total value of private use spent by the Company = 18,000. Treating this is a benefit or a
supply made to the person who made use of the company vehicle the Company is called
upon to pay 18,000 @ 20% = 3,600 as output tax. We do not make such an adjustment)
(7) In the above example if the van is going to be used by an executive of the
organization 30% of the time what is the VAT implication. (70% transport work)
• VAT implication is the same as above.
• Input tax on purchase :
Amount allowable = 84,000
• Input tax on private running expenses :
Amount not allowable = 3,000
(8) In the same example (No.6) if the registered person will be terminating the
mobile business one year later on 30.09.2003 and if the market value of the Van
on that day will be 300,000/- what will be the VAT implication?.
• At the time of termination the value of the remaining assets of
the taxable activity = 300,000/-
This is a deemed supply - Sec.16(5)
* Value of the deemed supply = 300,000/-
Output tax payable @ 20% = 60,000/-
(Although 30% was used for private purposes full value of disposal is liable to VAT)
(9) In the example No. 6 if the van is taken completely for private purposes (i.e 30%
is converted to 100%) What is the adjustment?.
Adjustment is the same as above. An asset in the business balance sheet is
transferred for private use of the owner.
Value of supply for private use = Market Value – Section 5(5)(iv)
= 300,000/-
VAT payable = 300,000 @ 20%
= 60,000/-
(In this type of cases the extent of private use can be estimated on the basis of
the distance travelled for private use and business use. If the private use is
commenced a few years after the purchase a reasonable proportion of the input
tax on purchase will be disallowed depending on the life time of the asset. If the
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