Govt. proposes legal changes for VAT, NBT

• Changes presented to P’ment to bring tax policies in line with Budget 2019 proposals 

By Ashwin Hemmathagama – Our Lobby Correspondent

Government moved several Bills in Parliament this week, amending Excise, Value Added Tax, and Nation Building Tax to be in line with tax policies proposed in Budget 2019.

The changes of Section 35 and 52 Excise Ordinance by moving Excise (Amendment) Bill has authorised the police officers to take legal action on matters pertaining to illicit liquor. The Amendments will fill in the vacuum in the provisions of the Ordinance where police officers are unable to initiate proceedings before a magistrate against the offender on matters pertaining to illicit liquor. 

Value Added Tax (Amendment) Bill provides for the VAT Policies which are approved in the Budget 2019 and Cabinet decision dated 25 June on the CP No.19/1781/108/162. Accordingly, the piece based VAT rate applicable on domestic sale of certain garments by the export-oriented BOI companies will be increased from Rs. 75 to Rs. 100, VAT payment dates will be changed to the 20th day of the month following the month relevant to such payment, and locally produced rice bran oil manufactured out of locally produced rice will be exempted from VAT. 

VAT imposed on the supply of condominium housing units will not be charged where the unit price of each condominium housing unit of a condominium housing project does not exceed Rs. 25 million; agreement to sell relating to such supply is executed as per Notaries Ordinance prior to the date of commencement of the VAT (Amendment) Act, or supply of any condominium housing units which has been completed and in respect of which the Certificate of Conformity has been obtained from the relevant local authority prior to the date of commencement of the VAT (Amendment) Act.

In addition, VAT rate applicable on the supply of condominium housing units was reduced to 6% and input tax relating to such supply will be counted at 5%, and the supply of goods by the construction contractors to their overseas projects will be treated as exports.

The Nation Building Tax (Amendment) Bill will implement the NBT Policies which are proposed in the Budget 2019 to include the exemption applicable on the importation of unprocessed gem stones granted on the approval of the National Gem and Jewellery Authority if the payment of such services is in a foreign currency and remitted to Sri Lanka; exemption applicable on the services provided by the construction sub-contractors will be extended to the main contractors as well; exemption of hotel services provided for a foreign currency; exemption of importation of lucerne (alfalfa) meal and pellets; exemption of locally value added imported palm oil; exemption of importation of yachts and other vessels for pleasure or sports; removal of exemption of cigarettes; and exemption of projects with an investment of $ 50 million or above during the project implementation period or the construction period.

According to the provisions of the Finance Bill, which provides for the tax policies proposed in the Budget 2019, Luxury Tax on Motor Vehicles will be amended to provide for chargeability of the tax based on the price of the vehicle instead of engine capacity and specifying the exempt vehicle categories. Levy on Foreign Commercial Transactions will be charged at the rate of 3.5% on the Credit/Debit card payments made to purchase goods/services from outside Sri Lanka. The date of implementation of the levy will be declared by the Minister by order published in the Gazette.

The Carbon Tax, which was imposed under the Finance Act, No.35 of 2018, payable by the vehicle owners based on the fuel type and the age of the vehicle at the time of renewal of annual registration, will be removed from 1 December. 

The Cellular Tower Levy will be removed considering the requests and demands of the public as well as the operators of the towers used to provide 5G coverage.