VALUE ADDED TAX ACT

1. Short title.

CHAPTER I

IMPOSITION OF VALUE ADDED TAX

2. Imposition of Value Added Tax.

2A. Minister may vary the rates by Order.

3. Tax not be charged on wholesale or retail supply of goods.

4. Time of supply.

5. Value of supply of goods or services.

6. The value of the goods imported.

7. Zero rating.

8. Supplies and importation expected from tax.

9. Goods or services supplied in Sri Lanka.

CHAPTER II

REGISTRATION

10. Persons making supplies in the course of a taxable activity to be registered.

11. Importers of goods to notify Commissioner-General.

12. Voluntary registration.

13. Commissioner-General to call for information.

14. Registered person.

15. Certificate of registration.

16. Cancellation of registration.

17. Registered person to return certificate on cancellation.

18. Liability not affected by cancellation of registration.

19. Registered person to notify certain changes.

20. Tax invoice.

CHAPTER III

RETURNS AND CALCULATION OF TAX

21. Returns and information to be furnished.

22. Credit for input tax against output tax.

23. Accounting basis.

24. Bad debt.

25. Adjustment of tax by credit or debit notes.

CHAPTER IIIA

IMPOSITION OF VALUE ADDED TAX ON THE SUPPLY OF FINANCIAL SERVICES BY ANY
SPECIFIED INSTITUTION OR BY ANY PERSON

25A. Charge of value added tax on the supply of financial services by specified institution or any person.

25B. Taxable period.

25C. Calculation of tax.

25D. Tax credit.

25E. Chapters IV to XVI to be applicable to registered specified institutions under this Chapter.

25F. Interpretation.

25G. Provisions of this Chapter to apply to a person supplying financial services.

CHAPTER IIIB

25H. Imposition of optional value added tax.

25I. Registration.

25J. The value of supplies from any Islamic Financial Transactions to be chargeable to tax.

25K. The use of electronic communications or electronic records.

CHAPTER IV

PAYMENT OF TAX

26. Payment of tax.

26A. Deduction of VAT Advance Payments.

27. Penalty for default.

CHAPTER V

ASSESSMENT OF TAX

28. Power of Assessor or Assistant Commissioner to make assessment.

29. Assessor or Assistant Commissioner to state why he is not accepting a return.

30. Power of Assessor or Assistant Commissioner to determine open market value.

31. Additional assessment.

32. Evidence of returns and assessment.

33. Limitation of time for assessment or additional assessment.

CHAPTER VI

APPEALS

34. Appeals to the Commissioner-General.

35. [REPEALED]

36. [REPEALED]

CHAPTER VII

FINALITY OF ASSESSMENT AND PENALTY FOR INCORRECT RETURN

37. Assessments or amended assessments to be final.

38. Penalty for incorrect return.

CHAPTER VIII

RECOVERY OF TAX

39. Recovery of tax.

40. Tax to be a first charge.

41. Notice to defaulter.

42. Recovery of tax by seizure and sale.

43. Proceeding for recovery before a Magistrate.

44. Recovery of tax out of debts.

45. Recovery of tax from persons leaving Sri Lanka. Abolition of the charging of the National Security Levy with effect from August 1, 2002.

46. Use of more than one means of recovery.

47. Power of Commissioner-General to obtain information for the recovery of tax.

48. Recovery of tax from the principal officer and others.

48A. Time limit for the recovery of the tax in default.

49. Commissioner-General to delegate powers and functions.

CHAPTER IX

SPECIAL CASES

50. Who may act for incapacitated person.

51. Precedent partner to act on behalf of partnership.

52. Principal officer to act on behalf of a company or body of persons.

53. Liability to pay tax in the case of cessation of taxable activity.

54. Liability of executor to pay tax.

55. Liability of certain persons to pay tax in respect of a taxable activity not belonging to them.

56. Joint trustees and executors the persons who act as trustees or executors.

57. Persons liable to pay tax upon liquidation of a company or dissolution of a body of persons.

CHAPTER X

REFUND OF TAX

58. Refund of excess tax.

58A [REPEALED]

59. Interest on refunds.

CHAPTER XI

MISCELLANEOUS

60. Signature and service of notice.

61. Validity of assessments.

62. Power to search building or places.

63. Power to search where taxable activity is carried on or carried out.

64. Keeping of records.

64A. Certain transactions and dispositions to be disregarded.

CHAPTER XII

OFFENCES AND PENALTIES

65. Penal provisions relating to breach of secrecy.

66. Penal provisions relating to fraud.

67. Penal provisions relating to returns.

68. Prosecution to be with the sanction of the Commissioner-General.

69. Compounding of offence.

CHAPTER XIII

ADMINISTRATION

70. Officers.

71. Value Added Tax Refund Fund.

72. Commissioner-General may pay rewards to informants.

73. Official secrecy.

74. Forms.

75. Regulations.

75A [REPEALED]

CHAPTER XIV

TRANSITIONAL AND SAVINGS

76. Transitional provisions.

77. Amendments to the Inland Revenue Act, No. 38 of 2000.

78. National Security Levy paid under the National Security Levy Act, No. 52 of 1991 to be deemed to be input tax.

79. Indemnity.

80. Savings.

CHAPTER XV

ABOLITION OF NATIONAL SECURITY LEVY AND THE GOODS AND SERVICES TAX

81. Abolition of the charging of the National Security Levy with effect from August 1, 2002.

82. Abolition of the charging of the Goods and Services Tax with effect from August 1, 2002.

CHAPTER XVI

INTERPRETATION

83. Interpretation.

84. Sinhala text to prevail in case of inconsistency.

FIRST SCHEDULE

SECOND SCHEDULE

THIRD SCHEDULE

FOURTH SCHEDULE

14 of 2002,

7 of 2003,

13 of 2004,

6 of 2005,

8 of 2006,

49 of 2006,

14 of 2007,

15 of 2008,

15 of 2009,

9 of 2011,

23 of 2011,

7 of 2012,

17 of 2013,

7 of 2014,

11 of 2015,

20 of 2016.

 

AN ACT to provide for the imposition and collection of a Value Added Tax on goods and services supplied in Sri Lanka or imported into Sri Lanka: To provide for the abolition of the National Security Levy and the Goods and Services Tax: And to provide for matters connected therewith or incidental thereto.

[Date of Commencement: 1st August, 2002]

[General Note:

(1) Section 13 of the Value Added Tax (Amendment) Act, 7 of 2014 as amended by s 26 of Act 11 of 2015 has amended the Value Added tax 2002 by the substitution for the words:

(a) “Commissioner” wherever such word occurred in the principal enactment, of the words “Senior Commissioner”;

(b) “Deputy Commissioner” wherever such words occurred in the principal enactment, of the word “Commissioner”;

(c) “Senior Assessor” wherever such words occurred of the words “Deputy Commissioner” or “Senior Deputy Commissioner”; and

(d) “Assessor” wherever such word occurred in the principal enactment, of the words “Assessor” or “Assistant Commissioner”.

(2) Amendment to sections 17, 19, 21, 25A(5), 26, 28,34, 41, 44, 47 and 66 by Act 11 of 2015 are not incorporated as they are not in force.]

1. Short title.

This Act may be cited as the Value Added Tax Act, No. 14 of 2002.

CHAPTER I

IMPOSITION OF VALUE ADDED TAX

2. Imposition of Value Added Tax.

(1) Subject to the provisions of this Act, a tax, to be known as the Value Added Tax (hereinafter referred to as “the tax”) shall be charged—

(a) at the time of supply, on every taxable supply of goods or services, made in a taxable period, by a registered person in the course of the carrying on, or carrying out, of a taxable activity by such person in Sri Lanka;

(b) on the importation of goods into Sri Lanka, by any person and on the value of such goods or services supplied or the goods imported, as the case may be, subject to the provisions of section 2A, at the following rates—

[S 2(1)(b) am by s 2(1)(a) of Act 13 of 2004; s 2(1)(a) of Act 6 of 2005.]

(i) for any taxable period commencing on or after August 1, 2002, but prior to January 1, 2004—

(a) at the rate of ten per centum (of which the Tax Fraction is 1/11) on the value of goods and services referred to in the Second Schedule, which are chargeable with the tax other than zero rated supplies;

(b) at the rate of twenty per centum (of which the Tax Fraction is 1/6) on the value of all other taxable goods and services which are chargeable with the tax other than zero rated supplies;

[S 2(1)(b)(i) subs by s 2(1)(a) of Act 13 of 2004.]

(ii) for any taxable period commencing on or after January 1, 2004 and ending on or before—

[S 2(1)(b)(ii) am by s 2(1)(b)(1) of Act 6 of 2005.]

(a) November 18, 2004 in respect of goods specified in the Third Schedule; and

[S 2(1)(b)(ii)(a) ins by s 2(1)(b)(1) of Act 6 of 2005.]

(b) December 31, 2004 in respect of goods for which the Third Schedule does not apply,

[S 2(1)(b)(ii)(b) ins by s 2(1)(b)(1) of Act 6 of 2005.]

at the rate of fifteen per centum (of which the Tax Fraction is 3/23 on the value of such goods and services supplied or imported, as the case may be, other than such goods and services chargeable with tax at zero per centum;

[S 2(1)(b)(ii) subs by s 2(1)(a) of Act 13 of 2004; am by s 2(1)(b)(2) of Act 6 of 2005.]

(iii) for the period commencing on November 19, 2004 and ending on or before December 31, 2004 and for any taxable period commencing on or after January 1, 2005, but prior to January 1, 2009 at the rate of five per centum (Basic Rate ) (of which tax fraction is 1/21) on the value of such goods supplied or imported as referred to in the Third Schedule other than such goods chargeable with tax at zero per centum;

[S 2(1)(b)(iii) ins by s 2(1)(c) of Act 6 of 2005; am by s 2(a) of Act 15 of 2009.]

(iv) —

(a) for any taxable period commencing on or after January 1, 2005 but prior to July 01, 2005 and for the period July 1, 2005 to August 1, 2005 at the rate of eighteen per centum (Luxury Rate) of which the Tax Fraction is 9/59; and

[S 2(1)(b)(iv)(a) subs by s 2(1) of Act 8 of 2006.]

(b) —

(i) for the period commencing on August 2, 2005 and ending on September 30, 2005, at the rate of twenty per centum (Luxury Rate) of which the tax fraction is 1/6;

(ii) for any taxable period commencing on or after October 1, 2005 and ending on November 23, 2010, in respect of goods at the rate of twenty per centum (Luxury Rate) of which the tax fraction is 1/6;

(iii) for any taxable period commencing on or after October 1, 2005 and ending on December 31, 2010, in respect of services at the rate of twenty per centum (Luxury Rate) which the tax fraction is 1/6,

[S 2(1)(b)(iv)(b) subs by s 2(1)(a) of Act 9 of 2011.]

on the value of such goods or services supplied as referred to in the Fourth Schedule, other than such goods chargeable with the tax at zero per centum;

[S 2(1)(b)(iv) para subs by s 2(1)of Act 9 of 2011.]

(v) —

(i) for any taxable period commencing on or after January 1, 2005 but prior to January 1, 2009, at the rate of fifteen per centum (Standard rate) (of which the Tax Fraction is 3/23) on the value of such goods or services supplied or goods imported other than in respect of the following—

(a) goods or services chargeable with tax at zero per centum; and

(b) goods or services specified in the Fourth Schedule of this Act;

[S 2(1)(b)(v) rep and s 2(1)(b)(v)(i) ins by s 2(b) of Act 15 of 2009.]

(ii) for any taxable period commencing on or after January 1, 2009 and ending on December 31, 2010, at the rate of twelve per centum, (Standard rate) (of which the Tax Fraction is 3/28) on the value of such goods or services supplied or goods imported other than in respect of—

[S 2(2)(b)(v)(ii) am by s 2(1)(b)(i) of Act 9 of 2011.]

(a) goods or services chargeable with tax at zero per centum; and

(b) goods or services specified in the Fourth Schedule of this Act;

[S 2(1)(b)(v) rep and s 2(1)(b)(v)(ii) ins by s 2(1)(b)
of Act 15 of 2009.]

(iii) for the period commencing on November 23, 2010 and ending on December 31, 2010 and for any taxable period commencing on or after January 1, 2011, and ending on December 31, 2014, at the rate of twelve per centum (of which the tax fraction is 3/28);

[S 2(1)(b)(v)(iii) subs by s 2(1) of Act 11 of 2015;
am by s 2(1) of Act 20 of 2016.]

(iv) for any taxable period commencing on or after January 1, 2015 and ending on or before March 31, 2016 and for the period commencing on April 1, 2016 and ending on May 1, 2016 and for the period commencing on July 12, 2016 and ending prior to November 1, 2016; and at the rate of eleven per centum (of which the tax fraction is 11/111),

[S 2(1)(b)(v)(iv) ins by s 2(1) of Act 11 of 2015;
am by s 2(2) of Act 20 of 2016.]

(v) for the period commencing on May 2, 2016 and ending on June 30, 2016, for the period commencing on July 1, 2016 and ending on July 11, 2016, and for any period commencing on November 1, 2016 and any taxable period thereafter at the rate of fifteen per centum (of which the tax fraction is 3/23),

[S 2(1)(b)(v)(v) ins by s 2(3) of Act 20 of 2016.]

on the value of such goods or services supplied, or goods imported, other than the goods or services chargeable with tax at zero per centum.

[S 2(1)(b)(v) para ins by s 2(1) of Act 11 of 2015.]

The Tax Fraction referred to above shall be applied to ascertain the amount of tax charged in the case of a tax inclusive consideration:

Provided, however the Commissioner-General shall not collect the tax under subsection (1) where the tax is—

(a) recovered in respect of any garments or fabric sold locally, which are referred to in the proviso to subsection (1) of section 22;

[S 2(1) first proviso (a) am by s 2(1) of Act 17 of 2013.]

(b) deferred by the Director-General of Customs in respect of supplies referred to in sub-paragraph (iv) of paragraph (a) of the second proviso to subsection (3) of section 2:

[S 2(1) first proviso (b) am by s 2(1)(b) of Act 13 of 2004.]

Provided further the tax payable on any taxable supply made on or after January 1, 2004, being a supply under an agreement which is not subject to review, not being a hire purchase agreement, entered into on or before December 31, 2003, and where such supply has been specifically identified within such agreement, shall be computed at the tax rate prevailing at the time of entering into such agreement, notwithstanding the provisions of subsection (9) of section 5.

[S 2(1) second proviso ins by s 2(1)(b) of Act 13 of 2004.]

(2) Notwithstanding the provisions of subsection (1) the Commissioner-General shall defer the payment of tax due—

(a) on any tea supplied prior to January 1, 2005 by any manufacturer of tea, registered with the Sri Lanka Tea Board established by the Sri Lanka Tea Board Law, No. 14 of 1975, to any registered broker for sale at the Colombo Tea Auction and where such tea is purchased by any exporter of tea registered with the Sri Lanka Tea Board established by the Sri Lanka Tea Board Law, No. 14 of 1975, until such time such tea broker furnishes the reconciliation on the disposal of such tea, as stipulated by the Commissioner-General;

[S 2(2)(a) subs by s 2(2) of Act 13 of 2004;
am by s 2(2)(a) of Act 6 of 2005.]

(b) on the supply of any taxable goods or services by a registered person to any other person who has entered into an agreement as a contractor to supply any goods or services to any Government department, utilizing funds provided by any foreign government or donor agency approved by the Minister, having regard to the interest of the national economy, where the value of such goods or services exceeds rupees twenty thousand, for a period of three months, from the end of the month in which such goods or services were purchased by such contractor.

The registered person to whom a deferment is granted under paragraph (b) shall not be required to account for the output tax on such supplies until he recovers the tax due on such supplies;

[S 2(2)(b) subs by s 2(2) of Act 13 of 2004; am by s 2(2)(b) of Act 6 of 2005.]

(c) —

(i) on the supply with the approval of the Textile Quota Board established by the Textile Quota Board Act, No. 33 of 1996, of any goods manufactured in Sri Lanka by such supplier to be utilized for the purpose of manufacture of garments for export either by manufacturers who are registered with the Textile Quota Board or through Export Trading Houses registered with the Board of Investment of Sri Lanka; or

[S 2(2)(c)(i) ins by s 2(2)(c) of Act 6 of 2005.]

(ii) on the supply of finished garments manufactured in Sri Lanka by such supplier with the approval of the Textile Quota Board established by the Textile Quota Board Act, No. 33 of 1996, to be exported through Export Trading Houses registered with the Board of Investment of Sri Lanka under section 17 of the Board of Investment of Sri Lanka Law No. 4 of 1978; or

[S 2(2)(c)(ii) ins by s 2(2)(c) of Act 6 of 2005;
am by s 2(2) of Act 8 of 2006.]

(iii) on the supply of garments by a manufacturer approved by the Textile Quota Board established under the Textile Quota Board Act, No. 33 of 1996 being garments manufactured from fabric supplied by an exporter of garments registered with the Textile Quota Board who exports directly or through an Export Trading House which has entered into an agreement under section 17 of the Board of Investment of Sri Lanka Law, No. 4 of 1978, with the Board of Investment of Sri Lanka established under the aforesaid Law; or

[S 2(2)(c)(iii) ins by s 2(3) of Act 8 of 2006.]

(iv) on the supply of any service which results in the improvement of the quality, character or value of any garment manufactured by any manufacturer of garments for export either directly or through any Export Trading House which has entered into an agreement with the Board of Investment of Sri Lanka under section 17 of the Board of Investment of Sri Lanka Law, No. 4 of 1978, being a supply made by any supplier approved by the Textile Quota Board established under the Textile Quota Board Act, No. 33 of 1996,

[S 2(2)(c)(iv) ins by s 2(3) of Act 8 of 2006.]

until such time as the activities of such garment manufacture or service provider are carried out in the manner stipulated by the Commissioner-General in the guidelines issued for this purpose, on the submission of the reconciliation relating to—

[S 2(2)(c)(iv) para subs by s 2(2)(a) of Act 9 of 2011.]

(a) the disposal of such goods, stating that such finished goods have in fact been exported by the recipient of the supplies; or

[S 2(2)(c)(iv) para (a) ins by s 2(2)(a) of Act 9 of 2011.]

(b) the supply of value added services, stating that such services have in fact been used for the manufacture of garments which have been exported:

[S 2(2)(c)(iv) para (b) ins by s 2(2)(a) of Act 9 of 2011.]

Provided that, with effect from April 1, 2011, deferment of tax under this paragraph shall be administrated by the Commissioner-General as stipulated in paragraph (e) of this subsection;

[S 2(2)(c) proviso ins by s 2(2)(a) of Act 9 of 2011; am by s 2(2)(a) of Act 17 of 2013.]

(d) on the supply with the approval of Export Development Board established by the Sri Lanka Export Development Board Act, No. 40 of 1979 with the concurrence of the Minister of the Ministry in charge of the subject of finance—

[S 2(2)(d) subs by s 2(c) of Act 15 of 2009.]

(i) of any goods manufactured in Sri Lanka by such suppliers and supply by such supplier to any manufacturer to be utilized for the purpose of manufacture of goods other than the goods referred to in paragraph (c) of this subsection by such manufacturers who are registered with the Export Development Board as exporters; or

[S 2(2)(d)(i) ins by s 2(c) of Act 15 of 2009.]

(ii) of any service by such suppliers provided to any manufacturer which results in the improvement of the quality, character or value of any goods manufactured by such manufacturer of goods for export who is registered with Export Development Board as an exporter, being a service provided by such suppliers approved by the Export Development Board established under the Sri Lanka Export Development Board Act, No. of 40 of 1979 as a supply of services identified for this purposes,

[S 2(2)(d)(ii) ins by s 2(c) of Act 15 of 2009.]

until such time as the activities of such manufacture of goods or service provider are carried out in the manner stipulated by the Commissioner-General of Inland Revenue in the guidelines issued for this purpose, on the submission of the reconciliation relating to—

[S 2(2)(d)(ii) para subs by s 2(2)(b) of Act 9 of 2011.]

(a) the disposal of such goods, stating that such finished goods have in fact been exported by the recipient of the supplies; or

[S 2(2)(d)(ii) para (a) ins by s 2(2)(b) of Act 9 of 2011.]

(b) the supply of value added services, stating that such services have in fact been used for the manufacture of goods which have been exported:

[S 2(2)(d)(ii) para (b) ins by s 2(2)(b) of Act 9 of 2011.]

Provided that, with effect from April 1, 2011, deferment of tax under this paragraph shall be administrated by the Commissioner-General as stipulated in paragraph (e) of this subsection;

[S 2(2)(d) proviso ins by s 2(2)(b) of Act 9 of 2011; am by s 2(2)(b) of Act 17 of 2013.]

(e) on the supply of goods or services by any registered person, who is registered in the Simplified Value Added Tax Scheme administrated by the Commissioner-General to—

[S 2(2)(e) subs by s 2(2)(c) of Act 17 of 2013.]

(i) any exporter or provider of zero rated services specified in terms of section 7;

[S 2(2)(e)(i) subs by s 2(2)(c) of Act 17 of 2013.]

(ii) any registered person who supplies goods or services to any Strategic Development Project in terms of subsection (4) of section 3 of the Strategic Development Projects Act, No. 14 of 2008, as is referred to in sub-paragraph (i) of paragraph (f) of Part II of the First Schedule, during the project implementation period so far as such supplies are project related supplies;

[S 2(2)(e)(ii) subs by s 2(2)(c) of Act 17 of 2013.]

(iii) any registered person engaged in any specific project referred to in subparagraph (ii) of paragraph (f) of PART II of the First Schedule (effective from April 1, 2011);

[S 2(2)(e)(iii) subs by s 2(2)(c) of Act 17 of 2013.]

(iv) any manufacturer who supplies goods manufactured in Sri Lanka to any exporter;

[S 2(2)(e)(iv) subs by s 2(2)(c) of Act 17 of 2013.]

(v) any supplier who provides value added services to an exporter which results in the improvement of the quality, character or value of any goods manufactured for export;

[S 2(2)(e)(v) subs by s 2(2)(c) of Act 17 of 2013.]

(vi) any person registered under the provisions of subsection (7) of section 22 of this Act, including any strategic development project in terms of subsection (4) of section 3 of the Strategic Development Project Act, No.14 of 2008, as is referred to in subparagraph (i) of paragraph (f) of Part II of the First Schedule where purchases are allowed to be made from persons registered for Simplified Value Added Tax Scheme, during the project implementation period insofar as such supplies are project related supplies;

[S 2(2)(e)(vi) subs by s 2(2) of Act 11 of 2015.]

(vii) any registered person who supplies any goods or services, to any registered person referred to in subparagraph (i), (ii), (iii), (iv), (v) or (vi) above, provided that, the Commissioner-General is, on the information available, is satisfied that the value of such supplies exceeds fifty per centum of the total supplies of such registered person who supplies such goods or services, until such time as the activities of such registered person is carried out to the satisfaction of the Commissioner-General in the manner stipulated by the Commissioner-General in the guidelines issued for such purpose and published in the Gazette.

[S 2(2)(e)(vii) ins by s 2(2)(c) of Act 17 of 2013; am by s 2(3) of Act 11 of 2015.]

(3) The tax on the importation of goods, shall be charged, levied and collected as if it is a customs duty and as if all goods imported into Sri Lanka are dutiable and liable to customs duty:

Provided however, no tax shall be charged on—

(a) any goods which entered into a customs bonded area or a free port referred to in PART IV of the Finance Act, No. 12 of 2012;

[S 2(3) first proviso (a) am by s 2(3)(a)(i) of Act 17 of 2013.]

(b) any fabric imported by any person for the purpose of manufacture of garments for export, who has entered into an agreement with the Board of Investment of Sri Lanka under section 17 of the Board of Investment of Sri Lanka Law No. 4 of 1978 for the manufacture of garments for export under such agreement, and the transfer of such fabric with or without value addition with the approval of the Director-General of Customs or the Board of Investment of Sri Lanka, to any other person for the purposes of such manufacture of garments for export;

[S 2(3) first proviso (b) am by s 2(1)(a) of
Act 7 of 2003.]

(c) any fabric imported by any person, who has registered with the Board of Investment of Sri Lanka as a Trading House for the purpose of manufacture of garments for export through other garment manufacturers as approved by the Board of Investment of Sri Lanka and transfer of such fabric with the approval of the Director-General of Customs or the Board of Investment of Sri Lanka to such garment manufacturers for the purposes of manufacture of garments for export;

(d) any fibre, yarn, grey cloth, finished cloth, chemicals and dyes used for the manufacture of fabric imported by any Fabric manufacturer who has entered into an agreement with the Board of Investment of Sri Lanka under section 17 of the Board of Investment of Sri Lanka Law. No. 4 of 1978 for the purpose of such manufacture;

(e) any ship imported on or before December 31, 2002;

[S 2(3) first proviso (e) subs by s 2(1)(b) of Act 7 of 2003; am by s 2(3)(a) of Act 6 of 2005.]

(f) any fabric or accessories imported by any person for the purpose of manufacture of garments for export, who has registered with the Simplified Value Added Scheme administrated by the Commissioner-General with the approval of the Commissioner-General.

[S 2(3) first proviso (f) ins by s 2(3)(b) of Act 6 of 2005; am by s 2(3)(ii) of Act 17 of 2013.]

Provided further, the Director-General of Customs may, defer the payment of the tax due on—

(a) —

(i) any goods imported, including any goods received from a customs bonded area, by a registered person who imports or receives such goods to be used by such person for the purpose of manufacture and export of the goods so manufactured;

(ii) any goods imported by any registered person referred to in subsection (7) of section 22 which are project related goods during such project implementation period;

[S 2(3) second proviso (a)(ii) am by s 2(2) of Act 13 of 2004.]

(iii) any goods being any plant, or machinery imported for any infrastructure project funded mainly by a foreign government or any regional or multilateral agency including the United Nations Organization and its affiliates, during the implementation period;

(iv) any purchase of fabric, manufactured by a person who has entered into an agreement with the Board of Investment of Sri Lanka under section 17 of the Board of Investment of Sri Lanka Law for the manufacture of fabric by another person who has entered into an agreement with the Board of Investment of Sri Lanka under section 17 of the Board of Investment of Sri Lanka Law No. 4 of 1978 for the manufacture of garments for export under such agreement and utilizes such fabric for the manufacture of garments for export;

(v) any plant or machinery imported, including any plant or machinery received from a customs bonded area, by a registered person who imports or receives such plant or machinery for the usage by such person for the manufacture of goods to be exported by such person;

[S 2(3) second proviso (a)(v) ins by s 2(4)(a) of Act 8 of 2006.]

(vi) any goods imported, including any goods received from customs bonded area by a person registered with the Simplified Value Added Scheme administrated by the Commissioner-General who imports or receives such goods for the manufacture of goods or the provision of services to a manufacturer of goods for export referred to in item (i) of paragraph (e) of subsection (2) of section 2;

[S 2(3) second proviso (a)(vi) subs by s 2(3)(b)(i) of Act 17 of 2013.]

(vii) any plant or machinery imported, including any plant or machinery received from a customs bonded area by a person registered with the Simplified Value Added Tax Scheme administrated by the Commissioner-General who imports or receives such plant or machinery for the usage by such person for the manufacture of goods or provision of services referred to in item (i) of paragraph (e) of subsection (2) of section 2, for the manufacture of goods to be exported;

[S 2(3) second proviso (a)(vii) subs by s 2(3)(b)(ii) of Act 17 of 2013.]

(viii)...

[S 2(3) second proviso (a)(viii) rep by s 2(3)(b)(iii) of Act 17 of 2013.]

(ix)...

[S 2(3) second proviso (a)(ix) rep by s 2(3)(b)(iii) of
Act 17 of 2013.]

for a period of sixty days or such other period not exceeding ninety days from the date of importation, receipt or purchase of such goods, as may be determined by the Minister by notification published in the Gazette;

(b) any goods temporarily imported into Sri Lanka—

(i) being plant, machinery or equipment of high value to be used for any project; or

(ii) being goods to be used as exhibition material or as materials in any technical demonstration,

and which are re-exported after the completion of such project, exhibition or demonstration, as the case may be, with the approval of the Minister, up to the date of such competition, exhibition or demonstration;

[S 2(3) second proviso (b) subs by s 2 of Act 15 of 2008.]

(c) any ship imported on or after January 1, 2003 but prior to November 16, 2005, for a period upto thirty six months, from the date of such import and such deferred amount shall be settled in quarterly installments before the expiration of such period of thirty six months.

[S 2(3) second proviso para rep and (c) ins by s 2(2)(b) of Act 7 of 2003; am by s 2(4)(b) of Act 8 of 2006.]

(d) plant, machinery or equipment imported by any enterprise qualified for a tax exemption under section 16D and 17A of the Inland Revenue Act, No. 10 of 2006, for the use by such enterprise for the purposes specified in any agreement entered into with the Board of Investment of Sri Lanka established under the Board of Investment of Sri Lanka Law, No. 4 of 1978, where any such agreement provides that tax is exempted under item (xxxiv) of paragraph (c) of PART II of the First Schedule, during the project implementation period, subject to the fulfillment of the conditions specified in the agreement.

[S 2(3) second proviso (d) ins by s 2(3) of Act 7 of 2012.]

The deferment of the payment of tax shall be subject to a furnishing of—

[S 2(3) second proviso para subs by s 2(3)(iv) of Act 17 of 2013.]

(a) a bank guarantee in a case where the tax deferred is less than rupees ten thousand; or

[S 2(3) second proviso para (a) subs by s 2(3)(iv) of Act 17 of 2013.]

(b) a Treasury Bill as a guarantee in a case where the tax deferred is not less than rupees ten thousand; or

[S 2(3) second proviso para (b) subs by s 2(3)(iv) of Act 17 of 2013.]

(c) a corporate guarantee which covers the amount of tax due subject to the conditions specified in the agreement in which the deferment is considered, on the goods imported, received or purchased:

[S 2(3) second proviso para (c) subs by s 2(3)(iv) of Act 17 of 2013.]

Provided that, in the case of such deferment under paragraph (b) no guarantee shall be required where such goods have been imported by a Government institution to be re-exported within one month from the date of importation.

[S 2(3) third proviso ins by s 2(3)(iv) of Act 17 of 2013.]

2A. Minister may vary the rates by Order.

(1) The Minister may by Order vary the rates specified in section 2 insofar as the same relates to the increasing or reducing of the rates previously specified, and to such extent as it relates to the imposition of Value Added Tax specified under the aforesaid section.

(2) The Order made by the Minister under subsection (1) shall be in operation immediately upon the Minister affixing his signature thereto.

(3) Every such Order shall as soon as convenient be published in the Gazette.

(4) Every such Order shall as soon as convenient thereafter be approved by a Resolution of Parliament.

(5) Where any such Order is not approved by Parliament it shall be deemed to be rescinded with effect from the date of such Resolution.

[S 2A ins by s 3 of Act 6 of 2005.]

3. Tax not be charged on wholesale or retail supply of goods.

(1) Notwithstanding the provisions of section 2, the tax shall not be charged on the wholesale or retail supply of goods, other than on the wholesale or retail supply of goods, by—

(a) a manufacturer of such goods; or

(b) an importer of such goods; or

(c) a supplier who is unable to satisfy the Commissioner-General, as to the source from which the “goods supplied by him, were acquired; or

[S 3(c) am by s 3(1) of Act 13 of 2004.]

(d) any person, where such goods consists of tea purchased on or after August 1, 2002 but prior to January 1, 2005, at an auction as is referred to in paragraph (a) of subsection (2) of section 2 for sale within Sri Lanka;

[S 3(d) ins by s 3(2) of Act 13 of 2004; am by s 4 of
Act 6 of 2005; s 3(1) of Act 8 of 2006.]

(e) any person, who supplies such goods under any tender agreement;

[S 3(e) ins by s 3(2) of Act 8 of 2006; am by s 3(1) of
Act 17 of 2013.]

(f) any person or a partnership having total supplies of goods for any consecutive period of three months in any calendar year not less than rupees—

[S 3(f) subs by s 3(1) of Act 11 of 2015.]

(i) five hundred million, for any such period of three months falling within any period commencing on or after January 1, 2013, but ending on or before December 31, 2013;

[S 3(f)(i) ins by s 3(1) of Act 11 of 2015.]

(ii) two hundred and fifty million, for any such period of three months falling within any period commencing on or after January 1, 2014, but ending on or before December 31, 2014;

[S 3(f)(ii) ins by s 3(1) of Act 11 of 2015; am by s 3(1)(a) of Act 20 of 2016.]

(iii) one hundred million, for any such period of three months falling within any period commencing on or after January 1, 2015, but ending on or before March 31, 2016, for the period commencing on April 1, 2016 but ending before May 2, 2016; and for the period commencing from July 11, 2016 but ending on or before November 1, 2016; and

[S 3(f)(iii) ins by s 3(1) of Act 11 of 2015; am by s 3(1)(b) of Act 20 of 2016.]

(iv) twelve million and five hundred thousand, for any such period of three months falling within any period commencing on or after November 1, 2016,

[S 3(f)(iv) am by s 3(2) of Act 20 of 2016.]

including the supplies under the preceding paragraphs of this section and any supplies exempted under Part II of the First Schedule;

[S 3(f) para ins by s 3(1) of Act 11 of 2015.]

Provided that, such tax shall be charged on such wholesale or retail supply of goods made prior to January 1, 2013, if—

(i) any registered person makes an application to that effect to the Commissioner-General;

(ii) any other person makes an appeal to that effect to the Commissioner-General,

and obtains a registration as provided for in section 10 or section 12.

[S 3 proviso subs by s 3(2) of Act 17 of 2013.]

Provided further, the chargeability to tax referring to any registered person specified in paragraph (f) shall be subject to the exemption granted under section 8, subject to the conditions specified therein.

[S 3 renumbered as s 3(1) by s 2(1)(a) of Act 7 of 2014; proviso subs by s 2(c) of Act 7 of 2014.]

(2) For the purposes of paragraph (f), the total supplies means, the aggregate value of supplies of—

(i) any person or partnership engaged in the wholesale or retail business while carrying on other business of similar nature in one place or different places under one or more registrations for the purposes of this Act, including any business in which any director of a company or partner of a partnership is a director or partner of such other business or businesses; and

[S 3(2)(i) am by s 3(2) of Act 11 of 2015.]

(ii) with regard to any subsidiary or associated company of a group of companies, engaged in the wholesale or retail business, the aggregate value of supplies of each company of the group, other than any company not engaged in the wholesale or retail business.

[S 3(2) ins by s 2(d) of Act 7 of 2014.]

4. Time of supply.

(1) The supply of goods shall be deemed to have taken place at the time of the occurrence of any one of the following whichever, occurs earlier—

(a) the issue of an invoice by the supplier in respect of the goods; or

(b) a payment for the goods including any advance payment received by the supplier; or

(c) a payment for the goods is due to the supplier in respect of such supply; or

(d) the delivery of the goods have been effected.

(2) Notwithstanding the provisions of paragraph (d) of subsection (1), where an invoice is issued in respect of goods delivered, within ten days from the date of delivery of such goods, the time of supply of such goods, shall be deemed to be the time at which the invoice was issued.

(3) The supply of services shall be deemed to have taken place, at the time, of the occurrence of any of the following whichever, occurs earlier—

(a) the service was performed; or

(b) a payment is received for the services rendered or for future services; or

(c) a payment is due for the services rendered or for future services; or

(d) an invoice is issued in respect of the services rendered.

(4) Notwithstanding the provisions of paragraph (a) of subsection (3), where an invoice is issued in respect of services supplied, within ten days from the dale of performance of such service, the time of supply of such service shall be deemed to be the time at which the invoice was issued.

(5) Notwithstanding the provisions of subsections (1) and (3), a supply shall be deemed to take place—

(a) where a supply is made under an agreement entered into, on or after April 1, 1998, other than a hire purchase agreement, which provides for periodical payments, when the payment is due or when the payment is received, whichever is earlier; and

(b) where goods are supplied under a hire purchase agreement, at the time the agreement is entered into.

(6) Where the Commissioner-General directs any registered person to account for the tax on a payment basis under section 23, the time of supply of goods or services supplied by such person shall be the time at which the payment in respect of such supply is received.

(7) Where the time of’ supply falls within any taxable period or portion of a taxable period ending on or before July 31, 2002, under the Goods and Services Tax Act, No. 34 of 1996 and any event referred to in this section takes place under this Act in relation to the same supply, such event shall not be considered as a time of supply.

5. Value of supply of goods or services.

(1) The value of a taxable supply of goods or services, shall be such amount where the supply is—

(a) for a consideration in money, be such consideration less any tax chargeable under this Act which amount shall not be less than the open market value;

(b) not for a consideration in money or not wholly in consideration of money, be the open market value of such supply.

(2) Subject to the provisions of subsection (3), where a supply of goods or services is made by a registered person for an amount which is less than the open market value to a person not being a registered person the value of such supply, shall be the open market value of the supply.

(3) Where a supply of goods or services is made by an employer, to his employee as a benefit from employment, the consideration in money for the supply shall be the open market value of such supply or where the open market value of such supply cannot be ascertained, the consideration in money of such supply shall be the cost of a similar benefit enjoyed by any other employee, as may be determined by the Assessor or Assistant Commissioner.

(4) Where a supply of services is made under any lottery, or any taxable activity of entering into or negotiating a wagering contract or any business of like nature, the value of such supply shall be the total amount of money receivable in respect of such supply less the consideration of the prizes or winnings awarded in such lottery, wagering contract, or any business of like nature as the case may be:

[S 5(4) am by s 2 of Act 14 of 2007.]

Provided however, in the case of a supply of services made under any lottery, any commission including the Value Added Tax charged on such commission, paid to any agent on the sale of a lottery, if any, shall be deducted in addition to the deductions referred to in this subsection.

[S 5(4) proviso ins by s 2 of Act 14 of 2007.]

(5) Where a supply of goods or services—

(i) is made by a person at the time of cancellation of the registration under section 16; or

(ii) is made to any person who makes a supply which is exempted under section 8; or

(iii) made by any person, not being a registered person or being a registered person who had not opted to charge tax under the proviso to section 3, who carries on or carries out any wholesale or retail trade; or

(iv) is appropriated by the supplier for his personal use or any other purpose other than the making of a taxable supply,

the value of such supply shall be not less than the open market value.

(6) The value of the supply of goods under a hire purchase agreement shall be the cash price determined in accordance with the provisions of the Consumer Credit Act, No. 29 of 1982, and shall not be less than the open market value:

Provided however in the case of a hire purchase agreement—

(a) where the cash price of any goods supplied under a hire purchase agreement includes the tax charged, by the supplier on the seller of such goods to be supplied under such agreement for which the seller cannot claim input tax credit being a person who is not registered under this Act, the cash price and the market value of such goods shall be adjusted for the purposes of charging the tax by deducting the tax so charged on the seller;

(b) under which second hand goods, which have been in circulation for a period over one year, are supplied, the cash price and the market value of such goods for the purposes of charging the tax shall be the value specified in the hire purchase agreement less any charge made for such hire purchase facility included in such agreement.

(7) The value of supply of land and improvements thereon, shall be the value of such supply less the value of land at the time of supply and the value of any improvements on the land as at March 31, 1998 which shall not be less than the open market value of such supply excluding the value of such land at the lime of supply and the value of any improvements on such land as at March 31, 1998.

(8) Where goods or services are supplied either on the issue of a ticket or by the deposit of money the value of such supply shall be the amount paid for such ticket less the tax payable under this Act or the amount deposited less the tax payable under this Act, not being any amount which is refundable as the case may be.

(9) The value of a supply, under any non reviewable agreement not being a hire purchase agreement entered into prior to April 1, 1998, shall be the total amount payable or paid under such agreement for any taxable period and shall be considered as a tax inclusive consideration.

(10) For any period—

(a) prior to October 25, 2014, where any goods supplied under a lease agreement is subsequently transferred to the lessee at the termination of such agreement for a consideration not exceeding ten per centum of the total consideration of the lease agreement, such consideration shall be deemed to be a lease rental recovered under such agreement, and where such consideration is more than ten per centum of the total consideration of the lease agreement, such supply shall be deemed to be a separate supply.

(b) on or after October 25, 2014, where any goods supplied under a lease agreement is subsequently transferred to the lessee at the termination of such agreement for a consideration, such consideration shall be treated as a lease rental obtained under such lease agreement.

[S 5(10) subs by s 4 of Act 11 of 2015.]

Further, where such consideration is more than ten per centum of the total consideration of the lease agreement such supply shall be deemed to be a separate supply.

(11) Where the consideration in respect of a supply of goods or services relates to a taxable supply and a supply which is not taxable, the consideration for such taxable supply shall be deemed to be such part of the consideration as is attributed to such taxable supply and shall not be less than the open market value of such taxable supply.

(12) Where goods are manufactured or produced or a service is provided, by using other goods, whether provided by the supplier or any other person, such other goods shall be deemed to be used in the manufacture or production or the provision of service as the case may be and the value of the supply of the goods so manufactured or produced and the supply of services in connection with such manufacture or production or the supply of the service shall be the open market value or the sum received as consideration for such supply, whichever is higher:

Provided however, where it is proved to the satisfaction of an Assessor or Assistant Commissioner that the supply of goods and the supply of services are two separate supplies, each such supply shall be treated as a separate supply by such Assessor or Assistant Commissioner.

[S 5(12) proviso am by s 4 of Act 17 of 2013.]

(13) Notwithstanding the provisions of Consumer Affairs Authority Act, No. 9 of 2003, the maximum retail price quoted for the goods to be sold in a wholesale or retail business may be adjusted where necessary for the chargeability to tax where liability to tax is specified in paragraph (f) of section 3 of this Act.

[S 5(13) ins by s 4 of Act 17 of 2013.]

(14) Where, for the period from January 1, 2016 to January 13, 2016 a registered person has issued an invoice other than a tax invoice, the value of supply shall be—

(i) where tax has been collected at a rate other than the rate of eleven per centum

(a) in the case of supply of any goods, the value shall be deemed to be equal to the amount derived by multiplying the total invoiced value by 200/297; and

(b) in the case of supply of any service, the value shall be deemed to be equal to the amount derived by multiplying the total invoiced value by 100/99;

(ii) where no tax has been collected, the value shall be deemed to be equal to tax inclusive consideration and excluding the tax at the rate of eleven per centum.

[S 5(14) ins by s 4 of Act 20 of 2016.]

(15) The value of supply of healthcare services shall be the value of such supply less the cost of diagnostic tests, dialysis and, services provided by the Out Patient Department but excluding medical consultation services:

Provided that, the Minister may, from time to time, in consultation with the Minister in charge of the subject of Health, prescribe any value of supply which may be excluded for the purposes of this subsection. Any such regulation made by the Minister shall be approved by the Cabinet of Ministers and published in the Gazette. Such regulations shall be placed before the Parliament for its approval and shall be effective only upon it being approved by the Parliament.

For the purpose of this subsection—

“medical consultation” includes a procedure whereby a medical practitioner registered under the Medical Ordinance reviews the medical history of a patient, examines a patient and makes recommendations as to care and treatment of such patient.

[S 5(15) ins by s 4 of Act 20 of 2016.]

6. The value of the goods imported.

The value of goods imported shall be the aggregate of—

(a) the value of the goods determined for the purpose of custom duty increased by ten per centum; and

[S 6(a) am by s 4 of Act 8 of 2006; s 2 of Act 49 of 2006.]

(b) the amount of any custom duty payable in respect of such goods with the addition of any surcharge, cess, any Port and Airport Development Levy payable under the Finance Act, No. 11 of 2002, and any excise duty payable under the Excise (Special Provisions) Act, No. 13 of 1989 on such goods.

[S 6 subs by s 5 of Act 6 of 2005.]

7. Zero rating.

(1) A supply of—

(a) goods shall be zero rated where the supplier of such goods has exported such goods; and

(b) services shall be zero rated where the supply of such services are directly connected with—

(i) any movable or immovable property outside Sri Lanka;

(ii) the repair of any foreign ship, aircraft or any merchant ship registered in Sri Lanka, or the refurbishment of marine cargo containers;

[S 7(1)(b)(ii) subs by s 4(1)(a) of Act 13 of 2004.]

(iia) any goods imported into Sri Lanka for the purpose of re-export under entre-port trade;

[S 7(1)(b)(iia) ins by s 4(1)(b) of Act 13 of 2004.]

(iii) a copyright, patent, licence, trade mark or similar intellectual property right, to the extent that such right is for use outside Sri Lanka;

(iv) the international transportation (including transshipment) of goods or passengers as are specified by the Commissioner-General by a Notification published in the Gazette;

(v) computer software development, in respect of software developed by the developer for use wholly outside Sri Lanka, and for which payment is received in foreign currency through a bank if, and only if, documentary evidence is produced to the satisfaction of the Commissioner-General of the supply of such services;

(vi) client support services provided, on or after April 1, 2001 over the internet or the telephone by an enterprise set up exclusively for the provision of such services to one or more identified clients outside Sri Lanka, for which payment is received in foreign currency, through a bank;

(vii) the provision of services to overseas buyers by a garment buying office registered with the Textile Quota Board established under the Textile Quota Board Act, No. 33 of 1996 or the Simplified Value Added Tax Scheme, as the case may be, where payment for such service is received in foreign currency, through a bank in Sri Lanka in so far as such services are identified by the Commissioner-General as being services essential for facilitating the export of garments to such overseas buyers.

[S 7(1)(b)(vii) subs by s 5 of Act 11 of 2015.]

(c) any other service, being a service not referred to in paragraph (b), provided by any person in Sri Lanka to another person outside Sri Lanka to be consumed or utilised outside Sri Lanka shall be zero rated provided that the payment for such services in full has been received in foreign currency from outside Sri Lanka through a bank in Sri Lanka.

[S 7(1)(c) ins by s 4(2) of Act 13 of 2004; am by s 5 of
Act 8 of 2006.]

(2) Where a registered person supplies any goods or services which is zero rated—

(a) no tax shall be charged in respect of such supply;

(b) the supply shall in all other respects be treated as a taxable supply and accordingly the rate at which tax is charged on the supply shall be zero.

8. Supplies and importation expected from tax.

No tax shall be charged on the supply of goods or services and the importation of goods specified in the First Schedule to this Act as such supplies and imports are not taxable unless zero rated under section 7:

[S 8 am by s 3 of Act 7 of 2014.]

Provided that, in the case of a registered person referred to in paragraph (f) of section 3 of this Act, the value of the supply of goods exempted under this Act made by such registered person directly or on behalf of any other person, which is in excess of twenty five per centum of the value of total supply of goods of such registered person other than the value of the supply of—

(a) zero rated articles;

(b) locally produced fresh milk, and with effect from November 1, 2015 locally grown fruits and vegetables or locally produced rice; and

(c) goods subject to Special Commodity Levy where the supply is made by the importer himself, shall notwithstanding the provisions contained in the Special Commodity Levy Act, No. 48 of 2007,

be deemed to be treated as liable supplies of such registered person, for any period ending prior to January 1, 2016 and chargeable to tax at the rate specified in section 2 of this Act using the tax fraction on the tax inclusive consideration:

[S 8 first proviso subs by s 6 of Act 11 of 2015; am by s 5(1) of Act 20 of 2016.]

Provided further, for any period ending prior to January 1, 2016, in the case of a registered person—

(a) who supplies pharmaceuticals, specified as exempted in PART II of the First Schedule to this Act; or

(b) who supplies software dedicated products including computers and computer accessories, exceeding seventy five per centum of the total value of supplies respectively of such registered person under paragraph (a) or paragraph (b) of this proviso, as the case may be, such registered person shall not be liable to tax on any deemed liable supplies referred to in this section.

[S 8 second proviso ins by s 3 of Act 7 of 2014.]

9. Goods or services supplied in Sri Lanka.

For the purposes of this Act goods or services shall be deemed to be supplied in Sri Lanka where the supplier carries on or carries out a taxable activity in Sri Lanka and the goods are in Sri Lanka at the time of supply or the services are performed in Sri Lanka by the supplier or his agent.

CHAPTER II

REGISTRATION

10. Persons making supplies in the course of a taxable activity to be registered.

(1) Every person who—

(i) on or after August 1, 2002, but prior to January 1, 2009, carries on or carries out any taxable activity in Sri Lanka shall be required to be registered under this Act, if—

(a) at the end of any taxable period of one month or three months, as the case may be, the total value of his taxable supplies of goods or services or goods and services made in Sri Lanka in that taxable period of one month or three months, as the case may be, has exceeded five hundred thousand rupees; or

(b) in the twelve months period then ending, the total value of his taxable supplies of goods or services or goods and services made in Sri Lanka has exceeded one million and eight hundred thousand rupees; or

(c) at any time, there are reasonable grounds to believe that the total value of his taxable supplies in Sri Lanka of goods or services or goods and services in the succeeding one month or three months taxable period, as the case may be, is likely to exceed five hundred thousand rupees or in the succeeding twelve months period is likely to exceed one million and eight hundred thousand rupees;

[S 10(1) rep and s 10(1)(i) ins by s 3(1) of Act 15 of 2009.]

(ii) on or after January 1, 2009, but prior to January 1, 2013 carries on or carries out any taxable activity in Sri Lanka shall be required to be registered under this Act, if—

[S 10(1)(ii) am by s 5(1) of Act 17 of 2013.}

(a) at the end of any taxable period of one month or three months, as the case may be, the total value of his taxable supplies of goods or services or goods and services made in Sri Lanka in that taxable period of one month or three months, as the case may be, has exceeded six hundred and fifty thousand rupees; or

(b) in the twelve months period then ending, the total value of his taxable supplies of goods or services or goods and services made in Sri Lanka has exceeded two million and five hundred thousand rupees; or

(c) at any time, there are reasonable grounds to believe that the total value of his taxable supplies in Sri Lanka of goods or services or goods and services in the succeeding one month or three months taxable period, as the case may be, is likely to exceed six hundred and fifty thousand rupees or in the succeeding twelve months period is likely to exceed two million and five hundred thousand rupees;

[S 10(1)(ii) ins by s 3(2) of Act 15 of 2009.]

(iii) on or after January 1, 2013, but prior to January 1, 2015 carries on or carries out any taxable activity in Sri Lanka shall be required to be registered under this Act, if—

[S 10(1)(iii) am by s 7(1)(i) of Act 11 of 2015.]

(a) at the end of any taxable period of one month or three months, as the case may be, the total value of the taxable supplies of goods or services or goods and services of such person, made in Sri Lanka in that taxable period of one month or three months, as the case may be, has three million rupees; or

(b) in the twelve months period then ending, the total value of the taxable supplies of goods or services or goods and services of such person, made in Sri Lanka has exceeded twelve million rupees; or

(c) at any time, there are reasonable grounds to believe that the total value of the taxable supplies of goods or services or goods and services of such person in Sri Lanka, in the succeeding one month or three months taxable period, as the case may be, is likely to exceed three million rupees or in the succeeding twelve months period is likely to exceed twelve million rupees;

[S 10(1)(iii) ins by s 5(2) of Act 17 of 2013.]

(iv) on or after January 1, 2015 but prior to April 1, 2016 carries on or carries out any taxable activity in Sri Lanka shall be required to be registered under this Act, if—

[S 10(1)(iv) am by s 6(1) of Act 20 of 2016.]

(a) at the end of any taxable period of one month or three months, as the case may be, the total value of the taxable supplies of goods or services or goods and services of such person, made in Sri Lanka in that taxable period of one month or three months, as the case may be, has three million seven hundred and fifty thousand rupees; or

(b) in the twelve months period then ending, the total value of the taxable supplies of goods or services or goods and services of such person, made in Sri Lanka has exceeded fifteen million rupees; or

(c) at any time, there are reasonable grounds to believe that the total value of the taxable supplies of goods or services or goods and services of such person in Sri Lanka, in the succeeding one month or three months taxable period, as the case may be, is likely to exceed three million seven hundred and fifty thousand rupees or in the succeeding twelve months period is likely to exceed fifteen million rupees:

[S 10(1)(iv) ins by s 7(1)(ii) of Act 11 of 2015.]

(v) on or after April 1, 2016, carries on or carries out any taxable activity in Sri Lanka shall be required to be registered under this Act if—

(a) at the end of any taxable period of one month or three months, as the case may be, the total value of the taxable supplies of goods or services or goods and services of such person, made in Sri Lanka in that taxable period of one month or three months, as the case may be, has three million rupees; or

(b) in the twelve months period then ending, the total value of the taxable supplies of goods or services or goods and services of such person, made in Sri Lanka has exceeded twelve million rupees; or

(c) at any time, there are reasonable grounds to believe that the total value of the taxable supplies of goods or services or goods and services of such person in Sri Lanka, in the succeeding one month or three months taxable period, as the case may be, is likely to exceed three million rupees or in the succeeding twelve months period is likely to exceed twelve million rupees:

[S 10(1)(v) ins by s 6(1)(ii) of Act 20 of 2016.]

Provided however, where the Commissioner-General is of opinion that the supply of goods relate to a single isolated transaction, the value of such supply may be excluded in calculating the total value of taxable supplies for the purposes of this section:

Provided further, for the purposes of paragraph (v), the requirement for the registration shall arise with effect from May 2, 2016.

[S 10(1) second proviso ins by s 6(1)(iii) of Act 20 of 2016.]

(2) Every person who is required to be registered under subsection (1), shall make an application for registration in the specified form to the Commissioner-General not later than fifteen days from the date on which is so liable to be registered.

For the purpose of this section the total value of taxable supplies shall not include the value of supply of goods purchased locally without any process in a wholesale or retail trading activity unless the value of total supplies for a period of three months in one calendar year including the supplies excluded under section 2 or exempted under PART II of the First Schedule to the Act, is not less than rupees—

[S 10(2) para am by s 4 of Act 7 of 2014; s 7(2) of
Act 11 of 2015.]

(a) five hundred million for any such period of three months falling within any period commencing on or after January 1, 2013, but ending on or before December 31, 2013;

[S 10(2)(a) ins by s 7(2) of Act 11 of 2015.]

(b) two hundred and fifty million for any such period of three months falling within the period commencing on or after January 1, 2014 but ending on or before December 31, 2014; and

[S 10(2)(b) ins by s 7(2) of Act 11 of 2015.]

(c) one hundred million for any such period of three months commencing on or after January 1, 2015, but prior to April 1, 2016 and for the period from July 11, 2016 but ending on or before November 1, 2016; and

[S 10(2)(c) ins by s 7(2) of Act 11 of 2015; am by s 6(2)(i) of Act 20 of 2016.]

(d) twelve million and five hundred thousand, for any such period of three months falling within any period commencing on or after November 1, 2016.

[S 10(2)(c) ins by s 6(2)(ii) of Act 20 of 2016.]

11. Importers of goods to notify Commissioner-General.

(1) Every person who is an importer of goods into Sri Lanka shall notify the Commissioner-General not later than fourteen days prior to the clearing of such goods that he has imported such goods and obtain from the Commissioner-General an identification number for the clearing of such goods:

Provided however, any importer who imports into Sri Lanka goods under the Passengers Baggage (Exemptions) Regulations made under section 107 of the Customs Ordinance or a person who is registered under section 10 or section 12, or paragraph (c) of section 14, or be deemed to be registered under subsection (2) of section 80 or is deemed to be a registered person under subsection (1) of section 75 of the Goods and Services Tax Act, No. 34 of 1996 shall not be liable to notify the Commissioner-General:

[S 11(1) proviso am by s 3 of Act 7 of 2003; s 6 of Act 17 of 2013.]

Provided further, with effect from January 1, 2013, any person registered under section 12, subsection (2) of section 80 or subsection (1) of section 75, as the case may be, of the Goods and Services Tax Act, No. 34 of 1996 shall be deemed to have obtained an identification number for the clearing of goods where such registered person fulfils the criteria specified in item (iii) of subsection (1) of section 10 or a registered person during the project implementation period as specified in subsection (7) of section 22 of this Act.

[S 11(1) proviso ins by s 6 of Act 17 of 2013.]

(2) Every importer referred to in subsection (1) shall make an application in the specified form to the Commissioner-General.

12. Voluntary registration.

Notwithstanding the provisions of sections 3 and 10, any person who supplies goods or services and carries on or carries out a taxable activity or imports any taxable goods may make an application for any taxable period prior to January 1, 2013, in the specified form to the Commissioner-General for registration under this Act:

[S 12 am by s 7 of Act 17 of 2013.]

Provided however, the Commissioner-General may after affording the applicant an opportunity of being heard, and having regard to the nature of the business carried on or carried out by such applicant, the value of the taxable supplies made by such applicant in the two proceeding taxable periods and the probability that the value of his taxable supplies will not exceed the value referred to in section 10, refuse to register such applicant.

13. Commissioner-General to call for information.

For the purpose of registering a person under section 14, the Commissioner-General may call for any information from such person at any time relating to any taxable activity carried on or carried out by such person.

14. Registered person.

(1) The Commissioner-General shall—

(a) where an application has been made by any person for registration under section 10;

(b) where an application for registration under section 12 has been made and such application has not been refused by the Commissioner-General; or

(c) where an application for registration, has not been made but the Commissioner-General is of opinion having regard to the nature of the activities carried on or carried out by such person, that such person is required to be registered under this Act, and after affording such person an opportunity of being heard, register such person with effect from such date as may be determined by him.

(2) Any person—

(a) registered under subsection (1) of this section; or

(b) deemed to be registered under section 75 or subsection (2) of section 80 of the Goods and Services Tax Act, No.34 of 1996 on August 1, 2002 and carrying on or carrying out a taxable activity subject to the conditions specified in section 3 for the registration of wholesale and retail trade or fulfilling the requirements specified in item (iii) of subsection (1) of section 10 of this Act, shall be a registered person for the purposes of this Act.

[S 14(2) subs by s 8 of Act 17 of 2013.]

15. Certificate of registration.

(1) The Commissioner-General shall, issue to a person registered under this Act upon such registration under section 14—

(a) a tax registration number; and

(b) a Certificate of registration.

(2) The Certificate of registration shall set out the name and other relevant details of the registered person, the date on which registration comes into effect, and the tax registration number of such person.

(3) The person to whom a certificate of registration is issued under subsection (1) shall, display such certificate at a conspicuous place in the place where he carries on or carries out the taxable activity. Copies of such certificate may be displayed in the event of there being more than one place of business.

(4) Every registered person who makes an exempt supply specified in the First Schedule shall display the categories of such goods and services supplied by him as given in the First Schedule at each such place of supply.

(5) Where any person fails to comply with the provisions of subsection (3) or (4) the Commissioner-General may—

(a) impose on such person a penalty of a sum not exceeding fifty thousand rupees and give notice in writing to such person of the imposition of such penalty;

(b) by notice in writing require such person—

(i) to pay such penalty; and

(ii) to comply with the provisions of subsections (3) or (4) as the case may be,

within such period as may be specified in such notice.

(6) The Commissioner-General may reduce, or annul any penalty imposed on any person under paragraph (a) of subsection (5) if such person proves to the satisfaction of the Commissioner-General that his failure to comply with the provisions of subsection (3) or (4) was due to circumstances beyond his control and that he has subsequently complied with such provisions.

16. Cancellation of registration.

(1) A registered person may make an application to have his registration cancelled at any time after the lapse of a period of twelve months following the date of registration, either under this Act or under the Goods and Services Tax Act, No. 34 of 1996 where such registered person has ceased to carry on or carry out a taxable activity or the total value of his supplies during any taxable period within such period does not exceed the value set out in section 10.

(2) The Commissioner-General—

(a) shall on receipt of an application made under subsection (1);

(b) may at any time,

and upon being satisfied that the applicant or any registered person as the case may be, has ceased to carry on or carry out a taxable activity or that the total value of his taxable supplies does not exceed the value referred to in section 10, or the facilities under the Customs Ordinance in respect of him have been suspended by the Director-General of Customs or that the continuation of such registration may impede the protection of revenue, cancel his registration or list such registration as an inactive registration for the purposes of this Act until further inquiries are made prior to such cancellation.

[S 16(2) am by s 8(1) of Act 11 of 2015.]

(2A) Where the Commissioner-General—

(a) cancels any registration under subsection (2), he shall cause a list of names and the registration numbers of such registered persons to be published in three daily newspapers in Sinhala, Tamil and English languages, having a wide circulation; or

(b) decides such registration as inactive, shall publish the names and registration numbers of the persons whose registration has been decided as inactive in the official web site of the Department of Inland Revenue and the list so published shall be updated on monthly basis, notwithstanding the provisions of section 73.

[S 16(2A) subs by s 8(2) of Act 11 of 2015.]

(3) The Commissioner-General may refuse to cancel the registration of any person where he is of the opinion that such person has not ceased to carry on or carry out a taxable activity or that it is necessary and expedient to continue with his registration for the protection of revenue.

(4) Where the Commissioner-General cancels the registration of a registered person he shall inform such person of the date of cancellation of the registration by registered post.

(5) With effect from the date of cancellation of the registration, any goods or services then forming part of the assets of a taxable activity carried on or carried out by that person shall be deemed to be supplied by that person in the course of carrying on or carrying out a taxable activity at a time immediately prior to the date of cancellation, unless the taxable activity (inclusive of all such assets) is carried on or carried out by another person who is a registered person.

17. Registered person to return certificate on cancellation.

(1) Where the registration of a registered person has been cancelled by the Commissioner-General, such person shall—

(a) return to the Commissioner-General the certificate of registration issued to him not later than fourteen days from the last day of the last taxable period during which the registration was valid;

(b) not, display in any place where such taxable activity is carried on or carried out, the certificate of registration or a copy thereof;

(c) not, issue any tax invoice, tax debit note or tax credit note as the case may be.

(2) Where any person fails to comply with the provisions of subsection (1), the Commissioner-General may—

(a) impose on such person a penalty of a sum not exceeding fifty thousand rupees, and give notice in writing to such person of the imposition of such penalty;

(b) by notice in writing or by electronic means require such person—

(i) to pay such penalty; and

(ii) comply with the provisions of subsection (1) within such period as may be specified in such notice.

(3) The Commissioner-General may reduce, or annul any penalty imposed on any person under paragraph (a) of subsection (2) if such person proves to the satisfaction of the Commissioner-General that his failure to comply with the provisions of subsection (1) was due to circumstances beyond his control and that he has subsequently complied with such provisions.

18. Liability not affected by cancellation of registration.

Notwithstanding the cancellation of registration under section 16, a registered person, shall be liable for any act done or omitted to be done while he remained a registered person in respect of the taxable supplies made by such person under this Act or under the Goods and Services Tax Act, No. 34 of 1996.

19. Registered person to notify certain changes.

Every registered person shall notify the Commissioner-General in writing of any change—

(a) in the name, address and place at which any taxable activity is carried on or carried out by such person;

(b) in the nature of the taxable activity carried on or carried out by such person;

(c) in the person authorized to sign returns and other documents; and

(d) in ownership of the taxable activity,

not later than fourteen days after the occurrence of the change.

20. Tax invoice.

(1) A registered person who makes a taxable supply shall issue to the person to whom such supply is made, if he has made a written request within fourteen days from the time of supply stating that he is a registered person under this Act or is deemed to be a registered person under this Act, and requires that a tax invoice be issued, a tax invoice shall be issued not later than twenty eight days after the time of such supply:

Provided however, where a request has been made by a person registered or deemed to be registered under this Act after the receipt of the first supply such person shall not be required to make any further request in respect of any subsequent supply:

Provided further, any tax invoice shall not be issued on the supplies considered as deemed liable supplies referred to in section 8 of this Act.

[S 20(1) second proviso ins by s 5 of Act 7 of 2014.]

(2) The tax invoice shall set out—

(a) the name, address and the registration number of the supplier;

(b) the name, address and the registration number of the person to whom the supply was made;

[S 20(2)(b) subs by s 7 of Act 20 of 2016.]

(c) the date on which the tax invoice was issued and its serial number which does not exceed 40 characters without any space;

[S 20(2)(c) subs by s 7 of Act 20 of 2016.]

(d) the date of supply and the description of the goods or services;

(e) the quantity or volume of the supply;

(f) the value of the supply, the tax charged and the consideration for the supply; and

(g) the words “TAX INVOICE” at a conspicuous place in such invoice.

Any tax invoice not issued within the period specified in subsection (1) and which does not conform to the provisions of subsection (2) shall not be a valid tax invoice. Any valid tax invoice issued under the Goods and Services Tax Act, No. 34 of 1996 prior to August 1, 2002 or thereafter shall be deemed to be a tax invoice issued under this Act.

[S 20 (2) para am by s 5(1) of Act 7 of 2003.]

(3) Where goods have been imported into Sri Lanka the customs goods declaration or any other document authenticated by the Director-General of Customs shall be treated as a tax invoice under this Act.

[S 20 (3) para am by s 5(2) of Act 7 of 2003.]

Any customs goods declaration or any other document authenticated by the Director-General of Customs and issued under the Goods and Services Tax Act No. 34 of 1996 prior to August 1. 2002 shall also be treated as a tax invoice.

(4) The original of the tax invoice shall be issued to the person to whom the supply was made and the duplicate of such invoice shall be retained by the person who makes such supply for a period of five years after the expiry of the taxable period in which such invoice was issued.

(5) It shall not be lawful to issue more than one tax invoice for each supply. If a registered person claims to have lost the original tax invoice the person who makes the supply, may issue to such registered person a copy clearly marked “copy only”.

(6) —

(a) Notwithstanding the provisions of subsection (2), where a registered person makes a taxable supply and the recipient of such supply is not a registered person such supplier shall issue an invoice giving the total consideration of such supply including the tax charged. Where the supplier has not kept adequate records on such supplies covered by such invoices all such supplies shall be considered as supplies made under the appropriate rate specified in section 2 of the Act. An invoice issued under this paragraph shall not be considered as a tax invoice for the purposes of this Act;

[S 20(6) am by s 5(3) of Act 7 of 2003; renumbered as s 6(a) by s 7(1) and am by s 7(2) of Act 6 of 2005; s 6 of Act 8 of 2006]

(b) Notwithstanding the provisions of subsection (2), though Value Added Tax is deferred, there shall be issued by every registered person, on supplies made under paragraphs (a) or (c) of subsection (2) of section 2, a tax invoice along with the Value Added Tax component shown as ‘Suspended Value Added Tax’. An invoice issued under this paragraph shall not be considered as a tax invoice for the purposes of this Act.

[S 20(6)(b) ins by s 7(3) of Act 6 of 2005.]

Provided however a tax invoice shall be issued by such registered person who makes such taxable supply to any Government institution, Provincial Council, Local Government institution, or any public corporation, for any taxable supply made to such institution, Council or such corporation, as the case may be, whether or not such institution, Council or corporation is registered under this Act.

[S 20(6) proviso ins by s 5(3) of Act 7 of 2003.]

(7) Any person who contravenes the provisions of subsection (1) shall be guilty of an offence and shall be liable on conviction after summary trial before a Magistrate, to a fine not less than rupees twenty-five thousand and not exceeding rupees two hundred and fifty thousand and thereafter in the event of the offence being continued to be committed, after conviction to a fine of rupees five hundred for each day on which the offence is so continued to be committed.

(8) Where any person convicted of an offence under subsection (7) continues to commit such offence beyond a period of fourteen days from the date of his conviction, the court may, upon an application for closure of the business being made by the Commissioner-General or any officer authorized in that behalf by the Commissioner-General, order the closure of such business.

(9) In any case where such person fails to comply with the closure order issued under subsection (8), the Magistrate shall forthwith order the fiscal of the court requiring and authorizing such fiscal before a date specified in such order not being a date earlier than three or later than seven clear days from the date of issue of such order to close such business. Such order shall be sufficient authority for the said fiscal or any police officer authorized by him in that behalf to enter the premises in which the business is carried on or carried out with such assistants as the fiscal or such police officer shall deem necessary to close such business.

CHAPTER III

RETURNS AND CALCULATION OF TAX

21. Returns and information to be furnished.

(1) Every registered person shall furnish, to the Commissioner-General not later than the fifteenth day of the month not later than the twentieth day of the month after the expiry of each taxable period, a return either in writing, of his supplies during that taxable period. Every such return shall be in the specified form containing all such particulars and relevant schedules as the Commissioner-General may specify by Order published in the Gazette.

[S 21(1) am by s 5 of Act 13 of 2004; s 8 of Act 6 of 2005; s 3 of Act 14 of 2007; s 8(1)(a) of Act 20 of 2016.]

Provided however, a return for the period of two months commencing from August 1, 2002, shall be furnished not later than the last day of October, 2002 by any person who has been allocated with a taxable period of three months.

(1A) Every registered person who furnishes a return of supplies which is not in such form and does not contain all such particulars with relevant schedules as are specified in subsection (1), shall be deemed for the purposes of this Act, not to have furnished a return on supplies.

[S 21(1A) ins by s 8(1)(b) of Act 20 of 2016.]

(1B) Where any registered person furnishes a return on supplies on or before the date specified in subsection (1) for any taxable period, and deemed under the provisions of subsection (1A) not to have furnished a return, the Assistant Commissioner shall before the expiry of fourteen days from the last day of the month after the expiry of such taxable period issue a notice to such registered person and inform him that the return furnished by him is not a proper return as it does not contain all such particulars in such form and relevant schedules as specified in subsection (1).

[S 21(1B) ins by s 8(1)(b) of Act 20 of 2016.]

(1C) Where any registered person receives a notice under subsection (1B), such person shall within fourteen days of receipt of such notice, furnish a proper return containing all such particulars in such form and relevant schedules required to make such return a proper return, and then the provisions of subsection (1A) shall thereafter not apply in respect of such return.

[S 21(1C) ins by s 8(1)(b) of Act 20 of 2016.]

(1D) The Assistant Commissioner shall acknowledge receipt of the return only upon receipt of a proper return which shall be considered a valid return for the purposes of subsection (1).

[S 21(1D) ins by s 8(1)(b) of Act 20 of 2016.]

(2) An Assessor or Assistant Commissioner may, by notice in writing, require any person who is not a registered person but, in his judgment is a person chargeable with tax, to furnish, a return containing all such particulars in such form and relevant schedules within the time specified in such notice.

[S 21(2) am by s 8(2) of Act 20 of 2016.]

(3) Any return due under subsections (1) or (3) of section 21 of Goods and Services Tax Act, No. 34 of 1996 for any taxable period commencing prior to August 1, 2002 shall be deemed to be a return due under this Act.

(4) For the purposes of obtaining full information in respect of the supply of goods or services made by any person, an Assessor or Assistant Commissioner may give notice in writing to such person requiring him—

(a) to produce for examination or transmit to the Assessor or Assistant Commissioner, within the period specified in such notice any books of accounts whether contained in a manual, mechanical or electronic format or combination thereof, trade lists, stock lists, registers, invoices, cheques, bank statements, paying in slips, accounts, auditors’ reports or other documents in his possession as may be specified in order to verify the entries in such books, documents and accounts;

(b) To attend in person or by an authorized representative at such place and on such date and at such time as may be specified in the notice for the purpose of being examined regarding the taxable activity carried on or carried out by that person.

(5) For the purposes of this Act, a Commissioner may give notice in writing to any person requiring him—

(a) to produce or transmit to such Commissioner within the period specified in such notice any books of accounts whether contained in a manual, mechanical or electronic format or combination thereof, trade lists, stock lists, registers, invoices, cheques, bank statements, paying-in-slips, accounts, auditors reports or other documents in his possession as may be specified in such notice;

(b) to attend in person or by an authorized representative at such place and on such date and at such time as may be specified in such notice so that he may be examined on any such matter as may be specified in such notice.

(6) A person who attends in compliance with a notice given under subsection (5) may be allowed by the Commissioner-General any reasonable expenses necessarily incurred by him in so attending.

(7) A Commissioner or an Assessor or Assistant Commissioner with the approval of a Commissioner, may retain in his custody as long as such retention is necessary for the purpose of this Act any books of accounts whether contained in a manual, mechanical or electronic formal or combination thereof, trade lists, stock lists, registers, invoices, cheques, bank statements, paying-in-slips, accounts, auditors’ reports or other documents in his possession as may be specified in order to verify the entries in such books, documents and accounts.

(8) An Assessor or Assistant Commissioner may give notice in writing to any person where he thinks, it is necessary, requiring him to furnish within the time specified in such notice—

(a) fuller or further returns; or

(b) fuller or further information relating to any matter which in the opinion of the Assessor or Assistant Commissioner be necessary or relevant for the assessment to tax payable by such person.

(9) A return statement or form purporting to be furnished under this Act by or on behalf of any person shall for all purposes be deemed to have been furnished by that person or by his authority, as the case may be, unless the contrary is proved, and any person signing such return, statement or form shall be deemed to be cognizant of all matters contained therein.

(10) Where any person fails to comply with the provisions of subsection (1), or fails to comply with the requirements of a notice given to such person by an Assessor or Assistant Commissioner under subsection (2) directing him to furnish within the time specified in such notice, a return containing such particulars as the Assessor or Assistant Commissioner may require, the Commissioner-General may—

(a) impose on such person a penalty of a sum not exceeding fifty thousand rupees, and give notice in writing to such person of the imposition of such penalty;

(b) by notice in writing require such person—

(i) to pay such penalty; and

(ii) to furnish the return he is required to furnish under subsection (1) if such return has not been furnished or to comply with the requirements or the notice given to him under subsection (2) if such requirements have not been complied with, as the case may be, within such period as may be specified in such notice.

(11) The Commissioner-General may reduce or annul any penalty imposed on any person under paragraph (a) of subsection (10) if such person proves to the satisfaction of the Commissioner-General that his failure to comply with the provisions of subsection (1) or the direction under subsection (2), as the case may be, was due to circumstances beyond his control and that he has subsequently complied with such provisions or direction.

(12) Except where the Commissioner-General, imposes a penalty under subsection (10), every person who contravenes the provisions of subsection (1) or subsection (2), shall be guilty of an offence under this Act and shall be liable on conviction after summary trial before a Magistrate to a fine not exceeding fifty thousand rupees or to an imprisonment of either description for a term not exceeding six months or to both such fine and imprisonment.

[S 21(12) am by s 6 of Act 7 of 2003.]

22. Credit for input tax against output tax.

(1) A registered person shall, in respect of any taxable supply made by him, account for and pay the tax by reference to such taxable period at such time and in such manner as may be specified in this Act:

Provided that, the amount of tax due on the supply of –

(a) garments within such percentage as is permitted to sell locally by the Board of Investment of Sri Lanka, established by the Board of Investments of Sri Lanka Law, No. 4 of 1978 under any agreement entered into by the manufacturer of garments for export under section 17 of the aforesaid law as approved by the Board of Investment of Sri Lanka or the Director-General of Customs, shall be rupees twenty five, in respect of any period commencing prior to November 1, 2016, and rupees seventy five, for any period commencing on or after November 1, 2016 for each such garment so supplied within Sri Lanka;

[S 22(1) proviso (a) am by s 9(1) of Act 20 of 2016.]

(b) fabric including any product as specified in the following sub-paragraphs made out of fabric within such percentage as is permitted to sell locally by the Board of Investment of Sri Lanka, established by the Board of Investment of Sri Lanka Law, No. 4 of 1978, under any agreement entered into by the manufacturer of fabric for export under section 17 of the aforesaid law, as approved by the Board of Investment of Sri Lanka or the Director-General of Customs shall be for any period commencing prior to November 1, 2016 at the following rates—

(i) linen or curtains at rupees forty per kilogram;

(ii) towels at rupees twenty five per item;

(iii) bags made out of fabric at rupees forty per item;

(iv) excess fabric as cut pieces not more than two metres in length of each piece at rupees twenty five per kilogram;

(v) any other fabric at rupees forty per kilogram; and

for any period commencing on or after November 1, 2016 at the rate of seventy five rupees for each unit specified in paragraphs (i) to (v):

[S 22(1) first proviso subs by s 11(1) of Act 17 of 2013; am by s 9(2) of Act 20 of 2016.]

Provided further that no other tax or levy payable at the point of entry into the country including any duty under the Customs Ordinance (Chapter 235) or Cess under subsection (1) of section 14 of Sri Lanka Export Development Act, No. 40 of 1979, shall be charged or collected on such sale of garments or fabric, where the amount specified in the preceding proviso has been paid on such sale.

[S 22(1) second proviso ins by s 7(2) of Act 7 of 2003; am by s 4(1) of Act 14 of 2007; s 3(2) of Act 7 of 2012.]

(2) Subject to the provisions of this Act, a registered person shall be entitled at end of each such period to credit for so much of his input tax as is allowable under this Act, and then to deduct such amount from any output tax that is due from him:

Provided however, any person adopting a payment basis of accounting, shall be entitled to claim credit on so much of his input tax as is allowable under this Act, only in respect of a supply for which the payment of the tax has been made by such person.

(3) Where a supply of goods or services received by a registered person, or goods imported by such person are used or are to be used partly for the purposes of a taxable activity carried on or carried out by such person on which tax can be levied other than any tax levied under Chapter IIIA of the Act and partly for other purposes, the tax on such supplies and importation shall be apportioned so however that only so much of the tax on such supplies or importation as is referable to his taxable activity on which tax can be levied other than any tax levied under Chapter IIIA of the Act shall he counted as his input tax:

[S 22(3) am by s 7(1)(a) of Act 8 of 2006.]

Provided however, in the case of a person providing leasing facilities under the Finance Leasing Act, No. 56 of 2000, the input tax on goods supplied under a finance leasing agreement entered into on or after July 1, 2003 but prior to January 1, 2004 shall be counted at the rate of ten per centum or less, even if the tax charged on such goods is more than ten per centum:

[S 22(3) first proviso am by s 6(1) of Act 13 of 2004.]

Provided further, that any person who accounts for the out put tax on all or part of his taxable supplies at the rate of ten per centum shall be entitled to deduct as input tax in relation to such supplies as is allowable under this Act only at the rate of ten per centum even where such person has paid the input tax at a higher rate than the rate of ten per centum on the value of such supplies received by him, other than in the case of a lorry, motor coach or wagon:

[S 22(3) second proviso ins by s 6(2) of Act 13 of 2004.]

Provided further, that any person who accounts for the output tax at the rate of five per centum shall not be entitled to deduct any input tax in relation to such supply other than in the case of a motor vehicle used for purposes of transportation of machinery for production:

[S 22(3) third proviso ins by s 9 of Act 6 of 2005.]

Provided further, any input tax paid on the purchase or importation of goods or the purchase of services specified in the Fourth Schedule (Luxury Rate) which is allowable by any person under this Act shall be restricted to twelve per centum other than in relation to the input tax paid on any goods imported including any goods received from a bonded area, by a registered person who imports or receives such goods, being raw-material to be used by such person for the purpose of manufacture and export of goods so manufactured.

[S 22(3) fourth proviso subs by s 7(1)(b) of Act 8 of 2006; am by s 4(2) of Act 14 of 2007; s 4(1) of Act 15 of 2009.]

For the purpose of this subsection—

“lorry” and “motor coach” shall have the respective meanings as assigned to them in the Motor Traffic Act (Chapter 203); and

“wagon” shall have the same meaning as assigned to it in the Finance Act, No.16 of 1995.

[S 22(3) para ins by s 6(1) of Act 13 of 2004.]

(4) Where an unregistered person leases out his land and buildings in terms of a tenancy agreement to a registered person, such registered person shall, notwithstanding that the unregistered person is not entitled to claim any input tax in respect of any expenses incurred in connection with the services provided on such land and buildings by another registered person, be entitled to claim such amount of input tax as determined by the Commissioner-General for the expenses incurred by him on such services provided on such land and buildings for the duration of such tenancy agreement if such registered person provides sufficient evidence to the satisfaction of the Commissioner-General to enable him to determine the amount of such input tax which such registered person is entitled to claim.

[S 22(4) subs by s 6(2) of Act 13 of 2004.]

(5) Where any return is furnished under subsection (1) or (2) of section 21 and if at the end of the taxable period to which such return relates the amount of subject to subsection (10), the input tax allowable under this Act exceeds the amount of the output tax, the excess of the input tax shall not be refunded but shall be set off against the output tax of the succeeding taxable period and so on. Any residue of such excess as has not been so set off in the period of six months from the end of the taxable period in which such excess first arose, shall, subject to the provisions of subsection (3) of section 58, be refunded; and where it is not so refunded the Commissioner-General shall pay interest, at such rate prescribed under section 59 on such amount for the period commencing on the expiration of one month from the end of the taxable period in which such refund became due and ending on the date of the refund subject to the provisions of the proviso to section 59:

[S 22(5) subs by s 6(3) of Act 13 of 2004; am by s 4(3) of Act 14 of 2007.]

Provided that where any residue of any excess input tax refundable on or after August 1, 2002 under the Goods and Services Tax Act, No. 34 of 1996 is outstanding on August 1, 2002, such excess shall not be deducted from any output tax due for any taxable period under this Act, but shall accordingly be refunded under the Goods and Services Tax Act, No. 34 of 1996:

[S 22(5) proviso ins by s 6(3) of Act 13 of 2004.]

Provided however, that where in a taxable period—

(a) there is an excess of input tax in any taxable period, in the case of a registered person who has entered into an agreement with the Board of Investment of Sri Lanka and that taxable period falls within the period referred to in item (xxvii) of the Schedule to the Goods and Services Tax Act, No. 34 of 1996 or Item (xx)of the First Schedule to this Act or, within the project implementation period as stipulated in any agreement referred to in item (xxvii) of the Schedule to the Goods and Services Tax Act No. 34 of 1996 or Item (xx) of the First Schedule to this Act or up to the commencement of commercial activities whichever is earlier;

(b) there is an excess of input tax and that taxable period falls before the taxable period, in which the making of taxable supplies commenced as undertaken by such person in the case of a person referred to in subsection (7);

[S 22(5) proviso (b) am by s 7(3)(a) of Act 7 of 2003.]

(c) there is an excess of input tax including the tax deferred under section 2, in the case of a registered person the value of whose zero rated supplies for the taxable period was more than fifty per centum of his total taxable supplies for that taxable period the excess of the input tax inclusive of any excess input tax brought forward from a preceding taxable period;

(d) any registered person who has obtained a deferment tax under section 2 in any taxable period and not made any zero rated supplies or made zero rated supplies of fifty per centum or less of the total taxable supplies for such taxable period, the excess of input tax not exceeding the amount of such differed tax under section 2;

[S 22(5) proviso (d) am by s 7(2) of Act 8 of 2006.]

(e) there is an excess of input tax including tax deferred under section 2, of any registered person who is registered with the Textile Quota Board established under the Textile Quota Board Act, No. 23 of 1996, being a supplier of goods or services to any registered person referred to in paragraph (c) of subsection (2) of section 2 or any registered person who is registered with the Export Development Board, who was subsequently brought under the deferment scheme administered by the Commissioner-General under paragraph (e) of subsection (2) with effect from April 1, 2011, being a supplier of goods to any person referred to in items (i) to (vii) of paragraph (e) of subsection (2) of section 2, referred to in paragraph (d) of subsection (2) of section 2, the value of supplies to suppliers referred to in paragraph (c), (d) or in the corresponding provisions of paragraph (e) for the taxable period was more than fifty per centum,

[S 22(5) proviso (e) subs by s 3(3) of Act 7 of 2012; am by s 9(3) of Act 20 of 2016.]

such part of the excess or such excess as the case may be, including any excess brought forward from any taxable period under this Act or under the Goods and Services Tax Act, No.34 of 1996 for any taxable period ending on or before July 31, 2002, shall be refunded, subject to the provisions of section 58 in the following manner—

[S 22(5) proviso (e) para ins by s 7(2) of Act 8 of 2006.]

(a) if the excess is in respect of the taxable period commencing on or after August 1, 2002 but ending prior to January 01, 2006, such excess shall be refunded not later than one month after the end of the taxable period or from the date of receipt of the return for such taxable period whichever is later;

[S 22(5) proviso (e)(a) ins by s 7(2) of Act 8 of 2006.]

(b) if the excess is in respect of the taxable period commencing on or after January 1, 2006 and ending on March 31, 2011—

[S 22(5) proviso (e)(b) subs by s 5(1)(a) of Act 9 of 2011.]

(i) the excess shall be refunded to a registered person referred to in paragraphs (c), (d) or (e), not later than fifteen days after the end of the taxable period or from the date of receipt of the return for the taxable period whichever is later, provided such refund is subject to the furnishing of a bank guarantee or an insurance bond by a registered person to the value as determined by the Commissioner-General, which is valid for a period of three months; and

[S 22(5) proviso (e)(b)(i) ins by s 7(2) of Act 8 of 2006; am by s 4(2) of Act 15 of 2009.]

(ii) the excess shall in all other cases be refunded not later than forty-five days after the end of taxable period or from the date of receipt of the return for the relevant taxable period whichever is later:

[S 22(5) proviso (e)(b)(ii) ins by s 7(2) of Act 8 of 2006.]

(c) if the excess is in respect of any taxable period commencing on or after April 1, 2011, such excess shall be refunded no later than forty-five days after the end of that taxable period or from the date of receipt of the return for the relevant taxable period whichever is later:

[S 22(5) proviso (e)(c) ins by s 5(1)(b) of Act 9 of 2011.]

Provided further, in case of a registered person who imports goods for re-sale without processing, the excess input tax representing the tax paid under subsection (3) of section 2 shall not be refunded, but such input tax including any excess input tax as at July 31, 2002, under the Goods and Services Tax Act, No. 34 of 1996 shall be carried forward except in a case where such supplies are made to any registered person referred to in items (i), (ii), (iii) or (iv) of paragraph (e) of subsection (2) of section 2 of this Act, subject to the conditions and the limitations specified in the guidelines published for the purposes of applying the deferment for the specified period.

[S 22(5) proviso subs by s 3(4) of Act 7 of 2012.]

In the event of a failure to pay such refund within such period, interest on such refund shall be payable from the date on which the refund becomes due to the date of payment thereof at such rate as may be prescribed under section 59 subject to the provisions of the proviso to that section.

(6) Any input tax attributable to the supply of goods or services received shall not be deducted under subsection (2) in respect of the following—

(i) if the supply is in respect of motor vehicles other than motor cycles, bicycles, motor coaches provided by an employer for the transportation of his employees, motor vehicles used for excursion tours, or for the transportation of tourists or transportation of goods or hiring cars, or motor vehicle forming part of any stock in trade of any taxable activity;

(ii) if the supply of goods or services received is not connected with a taxable activity or not included in the value of taxable supply;

[S 22(6)(ii) am by s 4(4)(a) of Act 14 of 2007.]

(iii) if the supply of goods or services received is not supported by—

(a) a valid tax invoice; or

(b) a customs goods declaration or other authenticated document issued by the Director-General of Customs under this Act or under the Goods and Services Tax Act, No. 34 of 1996,

and received within twelve months from the end of the relevant taxable period in respect of which such tax invoice was issued or from the date of importation of goods, as the case may be;

[S 22(6)(iii) subs by s 7(4) of Act 7 of 2003.]

(iv) if the input tax on—

(a) any invoice referred to in paragraph (iii) has not been deducted as provided for in this Act, from the output tax for any taxable period ending on or before the expiry of twelve months from the date of such tax invoice, by furnishing within the said period of twelve months the return for that taxable period; or

(b) any customs declaration referred to in paragraph (iii), has not been deducted as provided for in this Act, from the output tax for any taxable period ending on or before the expiry of twenty four months from the date of such customs declaration, by furnishing within the said period of twenty four months the return for that taxable period:

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