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

• To make an additional assessment 3 years is counted from the date of the
original assessment made as per Section 31 or made in the absence of a return.
• Only a return furnished on or before the date specified in Section 21(I) may be
treated as a return furnished under Section 21(I).
12.4 Issuing Assessments on rejecting returns
As stated above, where an assessor does not accept a return furnished by a Registered
Person he is required to communicate to such person by letter sent through registered
post “why” he is not accepting the return. This is a deviation from the corresponding
provision in the Inland Revenue Act. (Section 115(3) of the Act No.28 of 1979 and
Section 138(3) of the Act No.38 of 2000). The deviation is intentional. The Inland
Revenue Act provides that the Assessor shall communicate……… his “reasons” for
not accepting the return where as GST Act No.36 of 1998 and VAT Act No.14 of 2002
provide that the Assessor shall communicate…..why he is not accepting the return.
The word “reasons” has been omitted in both GST and VAT Acts. The cause for this is
the recent trend in attempting to attribute a harsh or restrictive meaning to the word
“reasons” in the Inland Revenue Act. At present a practice has been developed, at
least as a matter of routine, to challenge the validity or the legality of every assessment.
(on income tax) on the grounds that the reasons are inadequate in the sense that they
are not in the nature of judicial reasoning. However, unlike under the Inland Revenue Act
where the tax is paid out of taxpayers private profits, Value Added Tax, (as explained in
Chapter 9), is a tax collected on behalf of the government by the Registered Person from
the consumers. Therefore by the time a return is furnished the tax (VAT) is already
collected. The registered persons are not required to give reasons to the consumers
when VAT is added to the prices of Goods and Services which they supply to the
consumers. That is a legal obligation imposed upon them. They cannot refrain from
charging VAT to the consumers by applying their own interpretations to the law. In
cases of doubt they should consult the department and charge VAT accordingly.
Thus VAT should be collected on all taxable goods and services supplied by a registered
person and the VAT so collected should be in the hands of the registered person by the
time a return for that period is furnished by such person. Under the circumstances it was
considered an impediment to the protection of revenue, if the assessments which are
otherwise correct, are quashed (by courts), on a purely technical ground of formulating
reasons in the letters of communication issued by the assessors when there is sufficient
and adequate appellate procedure laid down in the Act, in order to contest an
assessment, if dis-satisfied. As held by the Court of Appeal in 1984 in Gunaratne Vs.
Jayawardena, the department is of the view that when rejecting a return giving an
indication or a clue to the taxpayer as to where he has gone wrong in his return is
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