VAT & NBT Business Taxation - EDBA Business School CA Sri Lanka Damith Gangodawilage MBA, PGD (BFA), EDBA, FTII, HNDA, FMAAT, ACPM, AIPFM(UK) Dy. Campus Director and Head of Academic Secretary of the Executive Council – Sri Lanka Institute of Taxation Imposition of Income Tax_Business Taxation

Taxation of Individuals Chapter Outline. The Scope Imposition Registration Computation Damith Gangodawilage VAT & NBT_Business Taxation

VAT & NBT_Business Taxation VALUE ADDED TAX Introduction. Introduced in France in 1954 by Maurice Laure, Jt. Director of Tax in France. Operate in 140 Countries today. VAT is charged on value addition in a chain of manufacturing or distribution. VAT is collected bit by bit along the chain and finally hit the consumer who does not add value. Damith Gangodawilage VAT & NBT_Business Taxation

VAT & NBT_Business Taxation VALUE ADDED TAX The Scope. Value Addition The enhancement a product or service before offering to customers. Wood Fabric Damith Gangodawilage VAT & NBT_Business Taxation

VAT & NBT_Business Taxation VALUE ADDED TAX The Scope. Wood Value Addition: Goods Cost Sale Price Value Addition Forester 4 4-0 = 4 Sawmills 4 7 7- 4 = 3 Bat maker's Bat 7 15 15 - 7 = 8 Retailer’s Bat 15 25 25- 15 = 10 Damith Gangodawilage VAT & NBT_Business Taxation

VAT & NBT_Business Taxation VALUE ADDED TAX The Scope. Wood Value Addition: Sale Price Value Addition Goods Cost VAT@12% Inc. Price Forester 4 4- 0 = 4 0.48 4.48 Sawmills 7 4 7- 4 = 3 0.36 7.84 7 15 15- 7 = 8 Bat maker's Bat 0.96 16.80 Retailer’s Bat 15 25 25- 15 = 10 1.20 28.00 Total 25 3.00 Damith Gangodawilage VAT & NBT_Business Taxation

VAT & NBT_Business Taxation VALUE ADDED TAX The Scope. Value Addition: Alice is in manufacturing of item ZZB using different materials. She is expecting your help to calculate her value addition created by her business. Alice has sold all ZZB at 350/- net each. Material A 0.25 @ 125 X 500 15,625.00 B 0.015 @ 157 X 500 1,177.50 C 1.25 @ 78,125.00 Wages 1.50 @ 50 X 500 37,500.00 Admin Expense 12,450.00 Selling & Distribution 9,850.00 Damith Gangodawilage VAT & NBT_Business Taxation

VAT & NBT_Business Taxation VALUE ADDED TAX The Scope. Value Addition: Sales 350 X 500 175,000 Value Addition 80,072.50 Material A £ 0.25 @ 125 X 500 15,625.00 B £ 0.015@ 157 X 500 1,177.50 C £ 1.25 @ 78,125.00 94,927.50 Damith Gangodawilage VAT & NBT_Business Taxation

VAT & NBT_Business Taxation VALUE ADDED TAX - Indirect Tax - Charged on goods and services supply in Sri Lanka - Born by the final consumer - Introduced by the Act no. 14 of 2002 Damith Gangodawilage VAT & NBT_Business Taxation

VAT & NBT_Business Taxation VALUE ADDED TAX Imposition. Goods and Services - On every taxable supply - At the time of supply - In a taxable period - By a registered person - In the course of carrying taxable activity & on the Imports by any person into Sri Lanka Damith Gangodawilage VAT & NBT_Business Taxation

VAT & NBT_Business Taxation VALUE ADDED TAX Imposition. Taxable Supply: - Goods or - Service - made or deemed to b made - In Sri Lanka - include zero rated supply Other than exempted supply. Any supply of Damith Gangodawilage VAT & NBT_Business Taxation

VAT & NBT_Business Taxation VALUE ADDED TAX Supply of Goods: Passing of exclusive ownership to another person. Sale of goods by public auction Transfer of goods under a hire purchase agreement Transfer of goods from a taxable activity to a non taxable activity Supply of Services: Any supply which is not a supply of goods for a consideration. Damith Gangodawilage VAT & NBT_Business Taxation

VAT & NBT_Business Taxation VALUE ADDED TAX Types of supplies: Out of Scope Zero rated 0% Types of Supplies Exempted Standard rate 12% Non-Taxable Supplies Taxable Supplies Damith Gangodawilage VAT & NBT_Business Taxation

If the invoice is issued within 14Days VALUE ADDED TAX Time of supplies: Services If the invoice is issued within 14Days Earliest of Date of Service is performed Date of Invoice is issued Date of Payment is received Date of payment due Time of Supply Goods Date of delivery Date of Invoice is issued Date of Payment received Date of payment due Damith Gangodawilage VAT & NBT_Business Taxation

VALUE ADDED TAX Value of supplies: Supply of Goods/Services Registered Person Unregistered Person Consideration in Money Consideration in Money Worth Inc. Value Con Con VAT Value OMV Value Tax Fraction = Rate of Tax 100 + Rate of Tax Damith Gangodawilage VAT & NBT_Business Taxation

VAT & NBT_Business Taxation VALUE ADDED TAX Taxable Activity: Business, trade, profession or vocation Clubs, Association or organization Provision of facilities to members/others for consideration, payment of subscription Hiring or leasing of any movable or immovable property Administration of any property The exploitation of intangible property Damith Gangodawilage VAT & NBT_Business Taxation

VAT & NBT_Business Taxation VALUE ADDED TAX Registration: Total value of taxable supplies three months period > 3Mn twelve month period > 12Mn - Total value of taxable supplies likely to be exceed Damith Gangodawilage VAT & NBT_Business Taxation

VAT & NBT_Business Taxation VALUE ADDED TAX Computation of VAT: Output tax VAT charged / deemed charged at the time of supply to the customers during the taxable period. Input tax VAT charged by registered supplier on goods / services VAT paid/deferred on imports of goods Damith Gangodawilage VAT & NBT_Business Taxation

VAT & NBT_Business Taxation VALUE ADDED TAX Types of Invoices: Supplier name, address and VAT Reg. No. Customer name, address and VAT Reg. No. Date of invoice and serial no. Date of supply, description of goods/services Quantity / volume Consideration and VAT The word TAX INVOICE Tax Invoice Tax Inclusive Invoice SVAT Invoice CUSDEC Damith Gangodawilage VAT & NBT_Business Taxation

VAT & NBT_Business Taxation NATION BUILDING TAX Introduction - Indirect Tax - Charged on the liable turnover - Introduced by Act No. 09 of 2009 - Objective is to collect the revenue to finance for re-building of infrastructure facilities affected by the war. Damith Gangodawilage VAT & NBT_Business Taxation

VAT & NBT_Business Taxation NATION BUILDING TAX Imposition: The following persons are liable to pay NBT Importer of any article Manufacture of any article Service providers Whole and retail sellers Damith Gangodawilage VAT & NBT_Business Taxation

VAT & NBT_Business Taxation NATION BUILDING TAX Imposition: Article - include any goods, material or any agricultural or horticultural produce. Manufacturing - Any process for, Making an article Assembling or joining any article Adopting for sale any article Packing, bottling, putting into boxes, cutting into pieces, cleaning, polishing, wrapping, labeling or in any other way preparing for sale. Damith Gangodawilage VAT & NBT_Business Taxation

VAT & NBT_Business Taxation NATION BUILDING TAX Taxable Period: The period for NBT is the relevant quarter. Quarter means the period of three months commencing from January 1, April 1, July 1 and October 1 of each year. Turnover Threshold: General Threshold - 3Mn per quarter, 15Mn per annum Special Threshold - 25Mn per quarter for, - Hotel, gest house, restaurant or similar business Educational service, supply of labour Processing of any locally produced agricultural produce for sale Damith Gangodawilage VAT & NBT_Business Taxation

VAT & NBT_Business Taxation NATION BUILDING TAX Computation: Distributors - 2% on ¼ of the liable turnover Whole sale & Retails Other - 2% on ½ of the liable turnover Others 2% of the liable turnover Damith Gangodawilage VAT & NBT_Business Taxation