Sri Lanka VAT raised to 15-pct from May 2, proposed income tax cuts suspended

ECONOMYNEXT – Sri Lanka’s finance ministry said value added tax (VAT) would be increased to 15 percent from 11 percent with effect from 02 May 2016 while the Nation Building Tax (NBT) would remain unchanged at 2-percent.

Deputy Secretary to the Treasury S R Attygalle said the changes were in accordance with that announced by Prime Minister Ranil Wickremesinghe last month in parliament.

The changes are a key to increasing revenue, reducing domestic borowing and money printing which will help eventually stabilize the credit system and the rupee.

The finance ministry statement also announced the re-imposition of the 0.3 percent share transaction levy.

It said the threshold for registration for VAT shall be 03 million rupees per quarter or 12 million rupees a year.

Wholesale and retail trade (other than by a manufacturer or importer) shall be liable for VAT and the tax shall be charged only on liable supplies.

The restriction on exempt supplies (deemed VAT) will be removed.

Supplies which are currently exempted shall be liable for VAT.

These are telecommunication services, import or supply of telecom equipment or machinery, high tech equipment including copper cables for telecom industry, telco licenses, healthcare services and supply of goods or services to any specified projects other than housing.

The finance ministry said the threshold for the Nation Building Tax (NBT) will be reduced to 03 million rupees per quarter from 25 million rupees, except for any locally procured agricultural produce in the preparation for sale.

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It removed present exemptions on telecommunication services, electricity supply, lubricants and supply of goods or services to any specified projects other than housing.

Anotther Treasury circular circular said banks, finance and insurance companies will be charged income tax at 28 percent. Lottery, betting and gaming will be at 40 percent from the year starting April 2016. All other companies to be taxed at 17.5 percent.

Pay-as-you-earn tax will be at a maximum of 16 percent on the same slabs as earlier. The employer will no longer be able to pay tax on behalf of the employee. Witholding tax on interest at 2.5 percent will be continued.  (COLOMBO, April 12, 2016)
 

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