NATION BUILDING TAX act

Arrangement of Sections

1. Short title.

2. Person to whom this Act applies.

3. Imposition of a Nation Building Tax.

4. Payment of the Tax.

5. Collection of the Tax by the Director General of Customs.

6. Tax Credits.

6A. Turnover from Islamic Financial Transactions to be chargeable to tax.

6B. Use of electronic communications or electronic records.

7. Notice of chargeability.

8. Certain provisions of the Inland Revenue Act to apply.

9. Sinhala text to prevail in case of inconsistency.

10. Interpretation.

SCHEDULE

9 of 2009,

32 of 2009,

10 of 2011,

4 of 2012,

9 of 2012,

11 of 2013,

10 of 2014.

12 of 2015,

22 of 2016.

AN ACT to provide for the imposition and collection of a tax to be called the Nation Building Tax on the liable turnover of every person to whom this act applies; and to provide for matters connected therewith or incidental thereto.

[Date of Commencement: 11th March, 2009]

[Note: S 6B inserted by Act 12 of 2015 not incorporated as not commenced.]

1. Short title.

This Act may be cited as the Nation Building Tax Act.

2. Person to whom this Act applies.

(1) The provisions of this Act shall apply to every person who—

(a) imports of any article, other than any article comprised in the personal baggage of the passenger, into Sri Lanka, [“baggage” shall have the same meaning as in section  107A of the Customs Ordinance]; or

(b) carries on the business of manufacture of any article; or

(c) carries on the business of providing a service of any description; or

[S 2(c) am by s 2 of Act 10 of 2011.]

(d) carries on the business of wholesale or retail sale of any article other than such sale by the manufacturer of that article being a manufacturer to whom the provisions of paragraph (b) applies.

[S 2(d) ins by s 2 of Act 10 of 2011.]

(2) Every person referred to in subsection (1) shall, hereafter in this Act, be referred to as “person to whom this Act applies”.

3. Imposition of a Nation Building Tax.

(1) A tax to be called the “Nation Building Tax” (hereinafter referred to as ”the Tax”) shall, subject to the provisions of this Act, be charged every person to whom this Act applies, calculated at the appropriate rate specified in the Second Schedule to this Act, in the following manner—

[S 3(1) am by s 3 of Act 10 of 2011.]

(i) in the case of a person referred to in paragraph (a) of subsection (1) of section 2, who imports any article into Sri Lanka on or after January 1, 2009 the tax shall be chargeable in respect of the liable turnover of such person arising from the importation into Sri Lanka of such article; and

(ii) in the case of a person referred to in paragraph (b) or (c) or (d) of subsection (1) of section 2, for every quarter commencing on or after January 1, 2009 (hereinafter referred to as “relevant quarter”, the tax shall be chargeable in respect of the liable turnover of such person for such relevant quarter.

[S 3(1)(ii) am by s 3 of Act 10 of 2011.]

(2) In this section “liable turnover”—

(i) with reference to any person referred to in paragraph (a) of subsection (1) of section 2 arising from the importation of any article, means the value of that article ascertained for the purpose of Value Added Tax under section 6 of the Value Added Tax Act, No. 14 of 2002, but does not include the value of any excepted article referred to in the First Schedule to this Act;

[S 3(2)(i) am by s 3 of Act 10 of 2011.]

(ii) with reference to any person and to any relevant quarter referred to in paragraph (b) of subsection (1) of section 2, means the sum receivable whether received or not from the sale in Sri Lanka, in that quarter, of any article manufactured by such person, other than any excepted article referred to in the First Schedule to this Act;

[S 3(2)(ii) am by s 3 of Act 10 of 2011.]

(iii) with reference to any person referred to in paragraph (c) of subsection (1) of section 2 and to any relevant quarter means the sum receivable, whether received or not, from the provision in Sri Lanka of any service referred to in that paragraph other than any excepted service referred to in the First Schedule to this Act:

[S 3(2)(iii) am by s 3 of Act 10 of 2011.]

Provided that, the liable turnover from the supply of any financial service in Sri Lanka, by any person carrying on the business of providing financial services shall, notwithstanding anything to the contrary in any other provisions of this Act, be—

(a) for any quarter ending on or before September 30, 2014 and the period commencing on October 1, 2014 and ending on October 24, 2014, the value addition attributable to such financial service, calculated for the purposes of applying the attributable method referred to in subsection (4) read with subsection (5) of section 25C of the Value Added Tax Act, No. 14 of 2002, for the payment of Value Added Tax on the supply of financial services; and

(b) for the period commencing from October 25, 2014 and ending on December 31, 2014 and for any quarter commencing on or after January 1, 2015, the value of supply referred to in subsection (2) of section 25A of the Value Added Tax Act, No. 14 of 2002:

[S 3(2) proviso subs by s 2(1)(a) of Act 12 of 2015.]

Provided however, the value addition attributable to such financial services shall be computed for the payment of tax on the business of financial services for the purpose of this Act by applying the attributable method referred to in subsection (4) read with subsection (5) of section 25C of the Value Added Tax Act, No. 14 of 2002.

[S 3(2) proviso ins by s 2(1)(a) of Act 12 of 2015.]

Provided further, that in calculating the value addition attributable to such financial service, where the amount of profits for each relevant quarter cannot be accurately ascertained, such amount may be estimated on the basis of available information. The estimated amount shall be adjusted to reflect the actual amount with the audited statement of accounts on yearly basis and such adjustment shall be submitted within six months after the closing date of the relevant accounting period.

[S 3(2)(iii) proviso ins by s 2(1) of Act 10 of 2014.]

(iiiA) For the purposes of paragraph (iii), with reference to any person referred to in paragraph (c) of subsection (1) of section 2 arising from the business of real estate and improvement thereon, means the value of that service ascertained for the purpose of Value Added Tax Act under subsection (7) of section 5 of the Value Added Tax Act, No. 14 of 2002, but does not include the value of any excepted service referred to in PART II of the First Schedule.

[S 3(2)(iiiA) ins by s 2(1)(b) of Act 12 of 2015.]

(iv) with reference to any person referred to in paragraph (d) of subsection (1) of section 2 and to any relevant quarter means the sum receivable whether received or not from the sale in that quarter, of any article, other than—

(1) pharmaceuticals;

(2) —

(a) sugar, dhal, potatoes, onions, dried fish, milk powder or chilies under the provisions of the Special Commodity Levy Act, No. 48 of 2007, where such article is sold on or before December 31, 2013, by the importer of such article; or

(b) any article which is subject to the Special Commodity Levy under the provisions of the Special Commodity Levy Act, No. 48 of 2007, where such article is sold on or after January 1, 2014, by the importer of such article without any processing except for adaption for sale;

[S 3(2)(iv)(2) subs by s 2(2)(i) of Act 10 of 2014.]

(3) gems or jewellery, if sold on the payment of foreign currency by any person authorised by the Central Bank of Sri Lanka to accept payment in foreign currency; and

[S 3(2)(iv) ins by s 3 of Act 10 of 2011; S 3(3) am by s 2(2) of Act 9 of 2012.]

(4) any printed book (with effect from July 1, 2011);

[S 3(2)(iv)(4) ins by s 2(3) of Act 9 of 2012.]

(5) any article exported;

[S 3(2)(iv)(5) ins by s 2(3) of Act 9 of 2012.]

(6) any article sold to any exporter for export;

[S 3(2)(iv)(6) ins by s 2(3) of Act 9 of 2012.]

(7) fresh milk, green leaf, cinnamon or rubber (latex, crape or sheet rubber) purchased from any manufacturer or producer thereof;

[S 3(2)(iv)(7) ins by s 2(3) of Act 9 of 2012; am by s 2(2)(ii) of Act 10 of 2014.]

(8) petrol, diesel or kerosene sold in a filling station;

[S 3(2)(iv)(8) ins by s 2(3) of Act 9 of 2012; am by s 2(2)(iii) of Act 10 of 2014.]

(9) retail sale of any article at duty free shops for payment in foreign currency;

[S 3(2)(iv)(9) ins by s 2(2)(iv) of Act 10 of 2014 ; am by s 2(1)(c)(i) of Act 12 of 2015.]

(10) LP Gas;

[S 3(2)(iv)(10) subs by s 2(1)(c)(ii) of Act 12 of 2015.]

(11) any motor vehicle identified under Harmonized Commodity Description and Coding Numbers for Custom purposes and liable to Excise Duty under the Excise (Special Provisions) Act, No. 13 of 1989, on the importation, including such motor vehicles in the stock remain unsold as at October 25, 2014 which would have been otherwise liable to such Excise duty on the importation, if they were imported after October 25, 2014, insofar as, such vehicles are sold by the importer himself;

[S 3(2)(iv)(11) ins by s 2(1)(c)(ii) of Act 12 of 2015.]

(12) cigarettes identified under Harmonized Commodity Description and Coding Numbers for Custom purposes and liable to Excise Duty under the Excise (Special Provisions) Act, No. 13 of 1989 and Cess under Sri Lanka Export Development Act, No. 40 of 1979, on the importation, including cigarettes in the stocks remain unsold as at October 25, 2014 which would have been otherwise liable to such Excise Duty and Cess on the importation if they were imported after October 25, 2014 insofar as, such cigarettes are sold by the importer himself; and

[S 3(2)(iv)(12) ins by s 2(1)(c)(ii) of Act 12 of 2015.]

(13) liquor identified under the Harmonized Commodity Description and Coding Numbers for Custom purposes and liable to Custom Duty under the Revenue Protection Act, No. 19 of 1962 and Cess under the Sri Lanka Export Development Act, No. 40 of 1979 on the importation, including liquor imported prior to October 25, 2014 in the stock remain unsold as at October 25, 2014 which would have been otherwise liable to such Custom Duty and Cess on the importation, if they were imported after October 25, 2014 insofar as, such liquor is sold by the importer himself.

[S 3(2)(iv)(13) ins by s 2(1)(c)(ii) of Act 12 of 2015.]

(3) Notwithstanding the provisions of subsection (2), the liable turnover for any relevant quarter of any person to whom this Act applies, referred to in paragraph (ii) , (iii) or (iv) of that section shall not include—

[S 3(3) am by s 3 of Act 10 of 2011.]

(i) any bad debt incurred by such person in that quarter;

(ii) any value added tax under the Value Added Tax Act, No. 14 of 2002 paid in that relevant quarter;

(iii) any excise duty under the Excise Duty (Special Provisions) Act, No. 13 of 1989, paid in that quarter other than such excise duty paid on the importation with effect from February 1, 2009:

[S 3(3)(iii) am by s 2(1) of Act 11 of 2013.]

Provided however, any bad debt recovered in any relevant quarter, shall be included in the relevant turnover of that relevant quarter.

(iv) rebate paid under the Export Development Rebate in relation to any international event as be approved by the Minister of Finance;

[S 3(3)(iv) ins by s 3 of Act 10 of 2011.]

(v) any turnover from the supply of any goods or services in relation to any international events as approved by the Minister of Finance (with effect from May 12,2010).

[S 3(3)(v) ins by s 3 of Act 10 of 2011.]

(4) Notwithstanding the provisions of subsection (1), the tax shall not be chargeable from any person referred to in paragraph (b), paragraph (c) or paragraph (d) of subsection (1) of section 2, for any relevant quarter if—

[S 3(4) am by s 3 of Act 10 of 2011.]

(i) such quarter is a relevant quarter which commenced prior to January 1, 2011 and the liable turnover of such person for that relevant quarter does not exceeds the sum of six hundred and fifty thousand rupees;

[S 3(4)(i) am by s 3 of Act 10 of 2011.]

(ii) such person has paid for that relevant quarter which commenced prior to January 1, 2011, Optional Value Added Tax under Chapter III B of the Value Added Tax Act, No. 14 of 2002;

[S 3(4)(ii) am by s 3 of Act 10 of 2011.]

(iii) the liable turnover of such person from the supply of any goods or services other than services referred to in paragraph (iv) and which does not exceed—

(a) the sum of five hundred thousand rupees if such relevant quarter is any quarter commencing on or after January 1, 2011 but prior to January 1, 2013;

(b) the sum of three million rupees if such relevant quarter is any quarter commencing on or after January 1, 2013 but prior to January 1, 2015;

[S 3(4)(iii)(b) am by s 2(1)(a) of Act 22 of 2016;]

(c) the sum of three million seven hundred and fifty thousand rupees if such relevant quarter is any quarter commencing on or after January 1, 2015 but prior to April 1, 2016; and;

[S 3(4)(iii) subs by s 2(2) of Act 12 of 2015; s 3(4)(iii)(c) am by s 2(1)(b) of Act 22 of 2016.]

(d) the sum of three million rupees if such relevant quarter is any quarter commencing on or after April 1, 2016:

Provided that, in case of any person whose liable turnover for the quarter commencing on April 1, 2016 exceeds the sum of three million rupees and does not exceed the sum of three million seven hundred and fifty thousand rupees, such person shall be chargeable with the tax only on the liable turnover accrued on or after May 2, 2016 but prior to July 11, 2016, and on or after the date on which this Act comes into operation;

[S 3(4)(iii)(d) ins by s 2(1)(c) of Act 22 of 2016;]

(iv) such quarter is a quarter commencing—

(A) on or after January 1, 2011 but prior to April 1, 2016 and the liable turnover of such person from—

(a) operating a hotel, guest house, restaurant or other similar business;

(b) the processing of any locally procured agricultural produce in the preparation for sale;

(c) providing educational services by any institution established locally for that purpose; or

(d) supply of labour (manpower),

and which does not exceed the sum of twenty five million rupees:

Provided that, in the case of any person whose liable turnover from any business referred to in subparagraphs (a), (c) and (d) for the quarter commencing on April 1, 2016 exceeds the sum of three million rupees and does not exceed the sum of twenty five million rupees, such person shall be chargeable with the tax only on the liable turnover accrued on or after May 2, 2016 but prior to July 11, 2016, and on or after the date on which this Act comes into operation;

(B) on or after April 1, 2016 and the liable turnover of such person from the processing of any locally procured agricultural produce in the preparation for sale and which does not exceed the sum of twenty five million rupees;

[S 3(4)(iv) subs by s 2(2) of Act 22 of 2016.]

(v) such quarter is a quarter commencing on or after January 1, 2013 and the liable turnover being turnover of any new business of manufacture of any article other than liquor or tobacco, or the provision of any service by any individual who is a citizen of Sri Lanka for a period of five years reckoned from the beginning of the year of assessment in which the commercial operation commences, if such individual—

(i) return from foreign employment on or after January 1, 2013; and

(ii) invests his foreign earnings to commence such business.

[S 3(4)(v) ins by s 2(2)(c) of Act 11 of 2013.]

4. Payment of the Tax.

Every person referred to in paragraph (b), paragraph (c) or paragraph (d) of subsection (1) of section 2 to whom this Act applies, shall, notwithstanding that no assessment has been made on such person for any relevant quarter, pay—

(i) the tax payable for the first month of that quarter on or before the twentieth day of the second month of that quarter;

(ii) the tax payable for the second month of that quarter on or before the twentieth day of the third month of that quarter;

(iii) the balance tax payable for that quarter on or before the twentieth day of the month immediately succeeding the end of the relevant quarter, calculated by deducting the tax paid under paragraphs (i) and (ii) from the tax payable for that quarter,

to the Commissioner-General, in such manner as may be specified by him in that behalf.

[S 4 subs by s 4 of Act 10 of 2011.]

5. Collection of the Tax by the Director-General of Customs.

(1) The Director General of Customs shall collect from every person referred to in paragraph (a) of subsection (1) of section 2, the tax chargeable from such person in respect of every article imported by such person, at the time such article is imported, and shall make an endorsement on the import invoice relating to such article specifying the amount so collected.

(2) Any amount collected by the Director-General of Customs in accordance with the preceding provisions of this section in relation to any article imported by any person to whom this Act applies shall be deemed to be the Tax chargeable in respect of the liable turnover arising from the importation of such article and shall be deemed to have been paid by such person to the Commissioner-General on the day on which such amount was so collected.

(3) Any amount collectible under subsection (1) shall for the purpose of collection and recovery of such amount and notwithstanding anything to the contrary in this Act, be deemed to be customs duty chargeable under the Customs Ordinance and accordingly, the provisions of the Customs Ordinance shall apply to the collection and recovery of such amount.

(4) Where any article imported into Sri Lanka is sold—

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