Tax payers to get reprieve?

Wednesday, 20 January 2016 00:00 - - {{hitsCtrl.values.hits}}

By Shehana Dain

Following another Budget proposal revision on VAT and NBT, local tax consultants unanimously voiced expectations that tax payers would not be burdened by the change.

Tax consultants yesterday said that the local business community should not have to pay anything more nor less in terms of tax to the Government and would have two options. That is either to raise credit notes and issue new invoices with the fresh rate and if unable to do so, if the invoice has been issued to the final consumer, the Inland Revenue Authority (IRD) should not penalise the taxpayer.

Gajma and Company Partner and Charted Accountants Tax Faculty member N. R Gajendran told the Daily FT: “People who have raised invoices who cannot claim input credit may not be bothered at all but for people who’re filing VAT returns it may be an issue unless the IRD allows them to go as it is. They should not penalise the taxpayer as it’s not their fault which has led to this confusion.”

He remarked that it is most likely taxpayers will not have to increase existing payments.

“They can cancel the transaction and redo the transaction if they wish to do so. If not, if they’re unable to do it because they can’t trace the customer, they can opt for another method.”

The IRD is yet to inform the measures that should be undertaken on tax revenue collected during the transition period up to 14 January, following the revenue authorities’ newspaper advertisement announcing changed rates on 1 January.

Gajendran also stressed the Finance Ministry would issue a statement with regard to this issue soon and that the businessmen would be able to clarify any concerns.

The prevailing 11% VAT rate was revised to a dual rate system of which 8% was lower while 12.5% was higher via Budget 2016.

PricewaterhouseCoopers (PWC) Director Tax Hiranthi C. Ratnayake agreed with industry sentiments and pointed out having a single rate for VAT would enhance its efficiency for the taxpayer and revenue authority.

“I hope that they keep it the way it was, otherwise it’s going to get very complicated. Having two rates is not very healthy and people might think having a lower rate is to their advantage but really they are losing because there is a restriction on input whenever they get an invoice. With VAT at 12.5% they can claim only 8% and 4.5% becomes a cost to them,” she opined.