Long-delayed NBT revision boosts dwindling tax revenue
With the passing of the Nation Building Tax (NBT) Amendment Bill in parliament last week, this long-delayed amendment comes into retrospective effect from April last year,
The imposition of the NBT was delayed due to legal and administrative issues of the Treasury. Considering five FR petitions filed impunging the Finance Minister’s decision to impose NBT from May 2, 2016, the Supreme Court issued an interim order suspending the imposition of the tax until the final determination of the petition or suitable amendments are passed in Parliament. Issuing a statement, the International Monetary Fund (IMF) has suggested that Sri Lanka should abolish the NBT as levying excises on a few key items at appropriate rates can support revenue needs while addressing externalities.
But the government decided to continue with NBT which is a consumption type tax. Therefore it was more important to decide the stage at which point the tax is to be imposed, a senior Treasury official told Business Times. Under this amendment, a large number of manufacturers and services providers have to register with the Inland Revenue Department (IRD) and pay NBT. It can be assumed that the consumption base NBT offers a major revenue option, he disclosed. A person engaged in the business of wholesale and retail trade has to register with the IRD and comply with the law relating to the imposition of the NBT, he added. The existing 2 per cent NBT will remain unchanged while the turnover limit to charge tax has been changed. The existing limit per quarter Rs.3.75 million has been reduced to Rs.3 million.
Turnover threshold of Rs. 25 million from operating a hotel, guest house, restaurant or other similar business, provision of education services by locally established institutions, and supply of labour (manpower) will be removed. Liable turnover threshold of Rs. 25 million continues for processing of any locally procured agricultural produce for sale.