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

(15) A contractor who is a registered person also has given out some houses on
rent. He uses some timber which he has purchased for his contract works, for
the purpose of some urgent repairs needed for the houses given on rent. The
market value of the timber used is 20,000/- What is the VAT implication?
• Renting of residential houses being an exempt activity, the using of timber in that
activity becomes a deemed supply from the taxable activity to the exempt
activity.
Value of supply = 20,000
VAT payable = 20,000 x 20%
= 4,000/-
• The contractor should declare this amount as his output tax.
(16) Mr. B, a registered person is an insurance and transport agent. He purchases a
Van to be used, for both transport business and private purposes. He has
ascertained that the business (transport)use of the vehicle to be 70% and private
use and insurance travelling to be 30%. Van was purchased from another
registered person, an importer on 01.09.2002, for a total consideration of
Rs.720,000/- including VAT (i.e value = 600,000 and VAT = 120,000). During
the taxable period ended on 30.09.2002 his insurance income (commission)
transport income and van running expenses are as follows.:-
Income
Life insurance commission = 300,000
Motor & other insurance commission = 600,000
900,000
Transport income = 500,000
(All excluding VAT) 1,400,000
Expenses
Value
VAT
Motor insurance 18,000 3,600
Fuel (Petrol) 15,000 -
Spare Parts 10,000 2,000
Repairs 5,000 -
48,000 5,600
What is the VAT implication ?
• B should charge VAT to the insurance company on the commission (Life
insurance commission is also liable to VAT although life insurance premium is
exempted).
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