VAT NBT Business Taxation EDBA Business School CA

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 1

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

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 3

VALUE ADDED TAX The Scope. Value Addition The enhancement a product or service before offering to customers. Wood Damith Gangodawilage Fabric VAT & NBT_Business Taxation 4

VALUE ADDED TAX The Scope. Wood Value Addition: Sale Price Value Addition 4 4 -0 = 4 Goods Forester Cost Sawmills 4 7 7 - 4 = 3 Bat maker's Bat 7 15 15 - 7 = 8 15 25 25 - 15 = 10 Retailer’s Bat Damith Gangodawilage 0 VAT & NBT_Business Taxation 5

VALUE ADDED TAX The Scope. Wood Value Addition: Goods Forester Cost Sawmills 4 Bat maker's Bat Retailer’s Bat Total Damith Gangodawilage 0 Sale Value Price Addition VAT@12% Inc. Price 4 0. 48 4 - 0 = 4 4. 48 7 7 - 4 = 3 0. 36 7. 84 7 15 15 - 7 = 8 0. 96 16. 80 15 25 25 - 15 = 10 1. 20 28. 00 25 3. 00 VAT & NBT_Business Taxation 6

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 B C 0. 25 @ 0. 015 @ 1. 25 @ 1. 50 @ Wages Admin Expense Selling & Distribution Damith Gangodawilage 125 X 500 157 X 500 125 X 500 50 X 500 VAT & NBT_Business Taxation 15, 625. 00 1, 177. 50 78, 125. 00 37, 500. 00 12, 450. 00 9, 850. 00 7

VALUE ADDED TAX The Scope. Value Addition: Sales Material 350 X 500 A B C £ 0. 25 @ £ 0. 015@ £ 1. 25 @ 125 X 500 157 X 500 125 X 500 Value Addition Damith Gangodawilage 175, 000 15, 625. 00 1, 177. 50 78, 125. 00 94, 927. 50 80, 072. 50 VAT & NBT_Business Taxation 8

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 9

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 10

VALUE ADDED TAX Imposition. Taxable Supply: - Goods or - Service Any supply of - made or deemed to b made - In Sri Lanka - include zero rated supply Other than exempted supply. Damith Gangodawilage VAT & NBT_Business Taxation 11

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 12

VALUE ADDED TAX Types of supplies: Out of Scope Zero rated 0% Standard rate 12% Types of Supplies Exempted Non-Taxable Supplies Damith Gangodawilage Taxable Supplies VAT & NBT_Business Taxation 13

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

VALUE ADDED TAX Value of supplies: Supply of Goods/Services Registered Person Consideration in Money Worth Consideration in Money Con VAT Damith Gangodawilage Unregistered Person Value OMV Value VAT & NBT_Business Taxation Inc. Value Tax Fraction = Con Rate of Tax 100 + Rate of Tax 15

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 16

VALUE ADDED TAX Registration: - Total value of taxable supplies three months period > 3 Mn twelve month period > 12 Mn - Total value of taxable supplies likely to be exceed Damith Gangodawilage VAT & NBT_Business Taxation 17

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 18

VALUE ADDED TAX Types of Invoices: - Tax Invoice - Tax Inclusive Invoice - SVAT Invoice - CUSDEC Damith Gangodawilage - 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 VAT & NBT_Business Taxation 19

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 20

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 21

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 22

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 - 3 Mn per quarter, 15 Mn per annum • Special Threshold - 25 Mn 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 23

NATION BUILDING TAX Computation: Whole sale & Retails Others Damith Gangodawilage Distributors - 2% on ¼ of the liable turnover Other - 2% on ½ of the liable turnover 2% of the liable turnover VAT & NBT_Business Taxation 24