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VAT net widens: Range of exempted items included
View(s):- Tax on everything from books, magazines, library services to jewellery, phones and machinery from January next year
Also included are cellular mobile phones, computers and computer accessories; construction, rice milling and milk processing machinery; hi-tech medical equipment, machinery and equipment for use in the leather or bag industries; taxi meters, agricultural machinery and parts; items and spares for the poultry industry; and energy-saving bulbs, along with raw materials for the manufacture of the same.
In his 2024 budget speech, President Ranil Wickremesinghe said the VAT rate would be hiked to 18 percent in January 2024 “along with the elimination of almost all VAT exemptions other than for products relating to health, education, and a few essential foods”.
“This brings Sri Lanka in line with regional peers, including India and Pakistan, in terms of the standard VAT rate,” he said. “Once the resulting VAT collections enable overall tax targets to be met, it will be possible to phase out other indirect taxes such as the Social Security Contribution levy (SSCL) and rationalise the Special Commodity levy (SCL), which are distortive in nature.”
The Sunday Times saw a copy of the proposal presented to Parliament, which indicated VAT would now be applied to medical equipment, machinery, apparatus, accessories and parts thereof, hospital furniture, drugs and chemicals donated to a public hospital or the Health Ministry “for the provision of health services to address any pandemic or public health emergency”.
It will be charged, too, on books, magazines, journals or periodicals (other than newspapers) for any period on or after November 11, 2016; unused postage and revenue stamps of the government or provincial council; media equipment or motorcycles recommended by the Media Secretary and approved by the subject Minister for use by media personnel; raw materials for the manufacture of spectacles and spectacle frames; and items and spares for the poultry industry.
The VAT will also apply to goods being brought for any international event approved by the Finance Ministry; plants, machinery or accessories for renewable energy generation; electrical goods; hot air balloons; and a host of locally produced items such as dairy products and rice products, sugar, jewellery; software, briquettes and pallets using biomass waste, and locally manufactured hydropower or wind power machinery and equipment.
Services provided by a person in Sri Lanka to another person outside Sri Lanka to be consumed or utilised by such other person outside Sri Lanka for which the payment is made in Sri Lanka rupees will be liable for VAT. Included are services being chartering of any vehicle; services being receipts from reinsurance by any local insurance company by way of commission or compensation in an insurance business, and research and development services. Paintings will be liable to tax at the point of sale by the artist thereof.
VAT will be applied to services provided by the Department of Commerce, the Board of Investment and Sri Lanka Ports Authority (under certain categories); and services being hotel accommodation to any sportsman, organiser of any sport event or sponsor arriving in Sri Lanka for participating in any sport event or activity connected with sports, as may be approved by the Minister who is in charge of the subject of sports.
Locally manufactured coconut milk will be taxable along with goods or services by any institution set up by the Ministry of Defence for the rehabilitation of disabled soldiers, insofar as the activities are carried out with the participation of such soldiers.
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