1. 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

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

3. 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

4. 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

5. 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
= 3
Bat maker's Bat 7 15
= 8
Retailer’s Bat 15 25
= 10
Damith Gangodawilage
VAT & NBT_Business Taxation

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

7. 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 @
125 X 500
15,625.00 B
157 X 500
1,177.50 C @
78,125.00
Wages @
50 X 500
37,500.00
Admin Expense
12,450.00
Selling & Distribution
9,850.00
Damith Gangodawilage
VAT & NBT_Business Taxation

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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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

19. 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

20. 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

21. 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

22. 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

23. 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

24. 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