ECONOMYNEXT – Sri Lanka’s tax office has dropped over 50,000 businesses from the value added tax net from January 01, after the threshold was raised by the new administration which also slashed the rate.
Sri Lanka tax office has published the list and asked them not to collect value added tax, saying it is acting under the instruction of the finance ministry and the law would be passed in parliament later.
Sri Lanka has also halved value added tax to 8 percent from an earlier 15 percent, raising concerns over revenues for 2020.
The new threshold is 75 million rupees a quarter amounting to 300 million rupees a year.
The dropped businesses are those that had never reported revenues of 75 million rupees a quarter.
The list includes stockbroking firms and investment banks, primary dealers, banks, mutual funds, as well as some exporters.
In a standard value added tax regime, exporters get input credit and are zero rated.
“Therefore, such inactivated persons are not permitted to collect VAT on the supplies made on or after January 01, 2020,” the Department of Inland Revenue said.
“Further, such persons are required to surrender their VAT Registration Certificate to the Commissioner, Customer Information Update Unit of the Inland Revenue head office or any nearest regional office.”
However all firms have to remit VAT collected up to December 31.
For residential condominiums an 8 percent tax had been removed from December 01.
Sri Lanka is also stopping the Economic Service Charge, an advance collection of income tax from January 01, subject to approval by parliament. (Colombo/Jan02/2019)