VAT for commodities, why not for condominiums

Deputy Secretary to the Treasury S.R. Attygalle on Friday asked participants at the E&Y (Ernst and Young) Budget Forum that if the poor man’s commodities were subject to VAT why was it wrong to ask the same of condominium owners. 



This remark was in response to a question from one the participants over the 2018 Budget proposal of 15% VAT on the sale of condominium housing units, a move which has caused concern within the real estate and property industry. The move comes after the Government, under the 2017 Budget, exempted the sale of condominium housing units from VAT.

Attygalle said that not applying VAT on condominium wasn’t justifiable when even commodities such as dhal were subjected to the same tax. 

Ernst & Young observed that the new move would pose several challenges to apartments developers who just went through a significant change from a liable regime to an exempt regime (in November 2016) and would now have to change back to a liable regime from 1 April 2018. 

This will have a significant impact on the pricing of units as the VAT inputs that are now absorbed as a cost will be compounded by output VAT on sales from 1 April 2018. As the input VAT has already been absorbed as a cost, this change could potentially result in the increase in the prices of apartments. This would also have an impact on the VAT deferment for input VAT during the project implementation period for projects that are still in their implementation phase.