Value Added Tax (VAT) is introduced by the Act No.14 of 2002 and is in force from 1st August 2002. VAT Act replaced the Goods and Services Tax (GST) which was almost similar tax on the consumption of goods and services.
It is a tax on domestic consumption of goods and services. The goods imported into Sri Lanka and goods and services supplied within the territorial limits of Sri Lanka are the subject matter of this tax. It is a multi-stage tax levied on the incremental Value at every stage in the production and distribution chain of Goods and Services. The tax is borne by the final or the ultimate consumer of Goods or services. It is an indirect tax and the Government will receive at the end, through all the intermediary suppliers in the chain of production and distribution, an amount equal to the amount paid by the final consumer.
There are certain supplies of goods and services exempt from the VAT. (As mentioned in Part II of the First Schedule of VAT Act).
Chargeability for Value Added Tax excluding chargeability on Financial Services
• Services providers
• Suppliers who supply goods under tender agreement
• Wholesale and Retail Trade
Who are liable for Registration?
• Every person who carries on a taxable activity
• If his taxable supply of goods or services or supply of goods and services,
• has exceeded Rs.3, 000,000 per quarter, or
• has exceeded Rs. 12,000,000 per annum, or
• likely to exceed Rs. 3,000,000 in the succeeding quarter or Rs 12 Million in the succeeding twelve months period
• A person or partnership engaged in the business of wholesale or retail trade, whose quarterly turnover/supplies exceeds Rs. 12.5 Million (including exempt or excluded supplies)
Standard Rate 15%
Registration for VAT
Firstly, a TIN Certificate and VAT registration could be obtained from the Tax Payer Services Unit at 1st Floor (South Wing) of the Inland Revenue Headquarters or from any nearest Regional Office of the Department.
The application should be made through Tax Type Registration Form (TPR_005_E), not later than fifteen days from the date on which became liable for registration.
Documents required for Registration
• TIN Certificate
• Certificate of Business Registration
• In case of limited liability company
o Memorandum & Articles of association
o List of Directors
o Certificate of incorporation
• Copies of NIC of the proprietors/Directors of the business
• Particulars of sales to prove the turnover & monthly Bank statements to prove cash receipts.
• Documents to prove that exports were made continuously by such exporters
• For 22(7) registrations - Project Plan
o a copy of the agreement with Board of Investment (if any)
o deed or rent/lease agreement of property
o sources of funds for the project to be proved for a BOI projects
o a list of intended purchases – local & imports
Responsibilities of a Registered person
• Display the Certificate of Registration at a clearly visible place in the business premises.
• Issue tax invoices (to other registered persons).
• Keep accounts for relevant periods.
• Pay taxes and furnish returns on or before due dates.
• Inform the Department any change in the following without delay.
o Business Place,
o Nature of business etc.
• Any person or partnership who supplies services other than Financial Services or imports and supplies of goods or engaged in the business of wholesale or retail is required to make the payment as follows:
o for the period 1st day – 15th day of a month - on or before the end of the month
o for the period 16th day - end of a month - on or before the 15th day of the following month
• Any other Person or Partnership (other than above) who supplies goods manufactured by such Person or Partnership who engaged in the supply of Financial Service is required to make the payment for the particular month on or before the 20th day of the following month.
Furnishing VAT Returns
• On or before the last day of the month after the expiry of each taxable period (may be monthly or quarterly)