Friday, December 8, 2023

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SL VAT increase mainly contribute to Rs. 4.13 trillion revenue

By: Staff Writer

Colombo (LNW): The government has targeted a 45 percent growth in revenue to Rs.4,127 billion, bulk of which is estimated to come from the VAT increase and of course the growth anticipated in the economy with the normalising of imports, finance ministry sources said.

Under the IMF programme finance ministry raised the corporate income tax, personal income tax and VAT and re-imposed taxes such as withholding tax and brought in new taxes such as Social Security Contribution Levy among other taxes to re-fill its coffers which went virtually empty.

The number of VAT (value-added tax) files registered is far below the actual figure denying substantial revenue collected from end consumers of goods.

He disclosed that only 13,000 files had been registered but the real number could be much higher.

State Minister of Finance Ranjith Siyambalapitiya said value-added tax (VAT) which will come into effect from January 2024, is only a short-term measure to boost Government revenue.

“VAT consolidation is a temporary measure taken in line with the IMF agreement to increase Government revenue,” he said.

In October, the Government announced that the VAT rate will increase from 15 to 18% with effect from 1 January 2024.

He also said that the VAT increase will not affect several sectors, including electricity tariffs.

Siyambalapitiya said that upon broadening the tax base, the Government could consider relief for the public.

As per the VAT Act, the Minister of Finance is empowered to revise the VAT rate by issuing a Gazette notification.

The Gazette Notification will be issued in due course. The VAT rate for Financial Serviceswill remain at 18%.

An amendment will be introduced to enable the Commissioner General of Inland Revenue (CGIR) to specify the format of the tax invoice.

Currently the VAT Act sets out the format of the Tax Invoice for VAT purposes but does not include a provision to allow the CGIR to specify the format.

Further, to the above proposal, the CGIR will be able to specify modifications to the Tax Invoice via notification.

The term ‘Taxable Period’ provided in the VAT Act will be defined to have the same Return filing frequency for all taxpayers. Clarification is required on whether the Return Filing requirement will be monthly or quarterly as per the revision proposed.

As per the VAT Act, currently there are two taxable periods i.e, one month for Registered Identified Purchaser (RIP) and registrants and three months for others.

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