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

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(a) Under the existing provisions Value of Supply VAT Total Cash price/market value 125,000 + 12,500 = 137,500 Hire-purchase charges 33,000 6,600 = 39,600 (Rate is 20% because it is 158,000 19,100 = 177,100 not specified) Initial payment 50,000 + 19,100 = 69,100 (b) Under the expected clarification Value of Supply VAT Total Cash price/market value 125,000 + 12,500 = 137,500 Finance/hire-purchase charges 33,000 Exempt = 33,000 158,000 12,500 = 170,000 Initial payment 50,000 + 12,500 = 62,500 (c) (d) (e) ‘B’ should pay VAT (Rs.12,500/-) at the time of signing the agreement. ‘H’ should declare that amount as output tax for the particular taxable period during which the agreement was signed because the “time of supply” in the case of a hirepurchase sale is the time at which the agreement is singed. However the Seller H is not entitle to full input credit on the purchase value of the hire-purchase stock (i.e the computer) because his supply value is partly exempted. The allowable portion will be = 125 X actual input tax paid. The balance will have to be added back if it has 158 been already claimed. If the finance charges are not separately disclosed to the buyer then VAT is chargeable on the full value of supply – i.e 158,000/- @ 10% which is equal to 15,800/- If the market value is more than 125,000/- (say 130,000/-) then VAT payable on the supply of goods component will be 130,000/- @ 10% = 13,000/- The exemption on finance charges is available only if the seller ‘H’ himself provides the hire-purchase credit facility. If the seller (say a retailer) sells only the goods while the finance facility is provided through a third party (a finance company) then the seller should charge VAT on the full consideration which will invariably be an enhanced price than the normal price because it will include finance charges. But in this type of a situation the buyer pays this price to the finance company in installments while the finance company pays the retailer only the price of the goods after retaining the finance charges. The customer should pay VAT to the retailer on the full value (i.e total consideration, which includes finance charge even if it is separately disclosed) for which the retailer should issue an invoice to the buyer (Vide Chapter 27). If the computer is a second hand one (i.e a one that has been used in Sri Lanka for more than 12 moths). 98
• Under the existing provisions the finance charges component will be exempted while the cash price component is liable to VAT. • Under the expected clarification both the cash price and finance charges will be exempted from VAT and the company H is no entitled to any input credit on such hire-purchase stocks. • The tax payers are expected to follow the latter method. Eg.2 - ‘B” is not a registered person for VAT. He imports a vehicle for Rs.1,000,000/- (C.I.F) VAT paid to custom is Rs.200,000/-. Thus his total cost is 1,200,000/-. He goes in for a hire-purchase with a hire-purchase company “H”. Transfer of vehicle form B to H is a separate supply. But it is not a liable to VAT because B is not a registered person. Price at which the vehicle will be transferred is Rs.1,200,000/- • Supply of the vehicle by H to B under a hire-purchase credit sale is another supply. This is liable to VAT, Usually the value of supply is 1,200,000/-. But in this type of situations where the supply is, made to the same original owner who is not entitled to input credit an adjustment will be made in respect of uncliamable input. Sec. 6(5). Vide para 3.8(5) Thus adjusted value of supply = 1,200,000 – 200,000 = 1,000,000 VAT payable @ 20% = 200,000/- The original owner, who bought the vehicle on hire-purchase terms, must pay 200,000/- as VAT to the hire-purchase company in addition to VAT paid (Rs.200,000) to Customs. Hire-purchase company H should declare this amount as output tax. 17.4 Re-possession of goods by the Hire purchase Co. • If the hire- purchaser defaults payment the hire purchase company has the right to re-posses the goods. The company usually re-sell the goods to a 3 rd party and proceeds are taken in satisfaction of the whole or part of the debt outstanding. Following supplies can be identified in such a situation. • Re-possession by the hire-purchase company constitute a separate supply. The supplier is the defaulting hire-purchaser and the consideration for the supply is the settlement of the debit. If the hire-- purchaser is a registered person and if the goods are not exempt he must issue a tax invoice to the hire-purchase company and charge VAT. The “value of supply” on which VAT is calculated is the amount of the debt that is settled which is usually the sale price of the asset 99
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But for the best to the September 0
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Preface The Value Added Tax Act was
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Chapter - 1 Introduction 1.1 Purpos
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However from the point of view of t
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The following test which has been a
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iv. Import of any fabric, yarn, gre
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Chapter - 3 The definitions of conc
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Eg. 1 : If “A” wants to termina
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c. Time of supply in relation to su
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Thus, any trade, business, etc. are
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a business in Sri Lanka and not to
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When the recipient is not a registe
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• There are two types of registra
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(ii) continued without making an ap
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(d) (e) (f) input credit has been c
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4.13 Activity Code Number “Suppli
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the H.S. classification it may be b
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5.8 Payment of tax on Assessments T
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5.11. Collection of VAT on Imports
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6.3 Approval For Deferment Facility
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iv. If an importer declares only pa
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6.6 Deferment on Local Supplies (Te
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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
Page 94 and 95: v. Importation of services are not
Page 96 and 97: Chapter - 17 Hire Purchase Transact
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
Page 106 and 107: 18.13 Leasing inputs • Leasing in
Page 108 and 109: 18.15 Leasing Advance Sometimes it
Page 110 and 111: Thus output tax of B on the termina
Page 112 and 113: Chapter - 19 Mortgages 19.1 Mortgag
Page 114 and 115: • 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
Page 122 and 123: Government agencies mentioned above
Page 124 and 125: Chapter - 24 Rulings 24.1 Following
Page 126 and 127: • None of the companies covered b
Page 128 and 129: which he has supplied to the garage
Page 130 and 131: instructions can be exempted if suc
Page 132 and 133: ii. iii. any other registration tha
Page 134 and 135: i. Membership fees and or subscript
Page 136 and 137: Chapter - 25 Zero Rated Supplies 25
Page 138 and 139: (ii) (iii) (iv) Services directly c
Page 140 and 141: Supply of facilities for crew chang
Page 142 and 143: 4. Yard to Port Transporting contai
Page 144 and 145: Chapter - 26 Travel Trade, Tourism
Page 146 and 147: 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
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5.2.2 To BOI garment manufacturing
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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
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