Business

Condo builders want VAT imposed only on new projects 

14 November 2017 - 168   - 0

 

The Condominium Developers Association of Sri Lanka (CDASL) met with Treasury officials on Tuesday morning seeking an amendment to a recent budget proposal to impose Value Added Tax (VAT) on condo builders. 

The proposal to impose 15 per cent VAT on the sale of Condominium Housing Units from 1st April 2018 has raised concerns. CDASL members say that whilst they appreciate the need for increased revenue to the Government and the intention to eliminate selective exemptions, they are strongly of the view that the re-imposition of VAT on the sale of condominium housing projects which have already commenced construction and sales will be counterproductive and cause a serious negative impact on the industry. 

The developers of such ongoing projects have entered into legally binding contracts with the buyers based on pre-agreed prices. The customers have in turn planned their funding and in many cases entered into financing arrangements in this regard, Pravir Samarasinghe, President CDASL told Timesonline when contacted.  

"It will also be extremely difficult for the developers to absorb the VAT. We anticipate that the net impact on the cost would be substantial and seriously impact the project viability.” 

This will have a significant impact on the pricing of housing units as the input VAT during the exempt regime has already been absorbed as cost and will not be available for set-off, he said. Consequently the re-imposition of VAT on existing projects will have a cascading effect on the prices of condominiums. 

The CDASL has strongly recommend that projects currently underway to be exempted from the output VAT and VAT on sale of condominiums to be imposed only on new  projects commencing operations after 1st April 2018. (Duruthu) 

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