ACT, No. 14 OF 2007

14of2007.pdf
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PARLIAMENT OF THE DEMOCRATIC
SOCIALIST REPUBLIC OF
SRI LANKA
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VALUE ADDED TAX (AMENDMENT)
ACT, No. 14 OF 2007
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[Certified on 12th April, 2007]
Printed on the Order of Government
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Published as a Supplement to Part II of the Gazette of the Democratic
Socialist Republic of Sri Lanka of April 12, 2007
PRINTEDATTHE DEPARTMENTOFGOVERNMENTPRINTING,SRI LANKA
TOBEPURCHASED ATTHEGOVERNMENTPUBLICATIONSBUREAU,COLOMBO1
Price : Rs. 12.25 Postage : Rs. 7.50

Value Added Tax (Amendment) 1
Act, No. 14 of 2007
[Certified on 12th April 2007]
L. D. — O. 3/2007
AN ACT TO AMEND THE VALUE ADDED TAX ACT, NO. 14 OF 2002
BE it enacted by the Parliament of the Democratic Socialist
Republic of Sri Lanka as follows :—
1. This Act may be cited as the Value Added Tax Short title.
(Amendment) Act, No. 14 of 2007, and shall be deemed to
have come into effect on January 1, 2007.
2. Section 5 of the Value Added Tax Act, No. 14 of 2002
(hereinafter referred to as the “principal enactment”) is hereby
amended in subsection (4) of that section, by the substitution
for the words “of like nature as the case may be.” of the words
“of like nature as the case may be :
Provided however, in the case of a supply of services made
under any lottery , any commission including the Value
Added Tax charged on such commission, paid to any agent
on the sale of a lottery, if any, shall be deducted in addition
to the deductions referred to in this subsection.”.
3. Section 21 of the principal enactment is hereby Amendment of
amended in subsection (1) of that section by the substitution section 21 of
the principal
for the words “after the expiry of each taxable period a return
enactment.
of his supplies” of the words “after the expiry of each taxable
period, a return either in writing or by electronic means, of his
supplies”.
4. Section 22 of the principal enactment is hereby Amendment of
amended as follows :— section 22 of
the principal
enactment.
(1) in the second proviso to subsection (1) of that section,
by the substitution for the words “the Customs
Ordinance shall be charged” of the words and figures
“the Customs Ordinance (Chapter 235) or acess under
subsection (1) of section 14 of Sri Lanka Export
Development Act, No. 40 of 1979, shall be charged”;
2 Value Added Tax (Amendment)
Act, No. 14 of 2007
(2) in subsection (3) of that section, by the substitution
in the fourth proviso thereto, for the words “the
purchase of goods or services specified in the Fourth
Schedule (Luxury Rate) by any person which is
allowable under this Act shall be restricted to fifteen
per centum.” of the words “the purchase or
importation of goods or the purchase of services
specified in the Fourth Schedule (Luxury Rate)
which is allowable by any person under this Act
shall be restricted to fifteen per centum other than
in relation to the input tax paid on any goods
imported including any goods received from a
bonded area, by a registered person who imports or
receives such goods, being raw-material to be used
by such person for the purpose of manufacture and
export of goods so manufactured”;
(3) in subsection (5) of that section, by the substitution
for the words “the input tax allowable under this
Act exceeds the amount of the output tax” of the
words and figures “subject to subsection (10), the
input tax allowable under this Act exceeds the
amount of the output tax”;
(4) in subsection (6) of that section—
(a) in paragraph (ii), by the substitution for the
words “not connected with a taxable activity”
of the words “not connected with a taxable
activity or not included in the value of taxable
supply”;
(b) in the second proviso, by the substitution for
the words and figures “such input tax for any
taxable period commencing on or after January
1, 2003” of the words and figures “such input
tax for any taxable period commencing on or
after January 1, 2003 but prior to January 1,
2007.”.
Value Added Tax (Amendment) 3
Act, No. 14 of 2007
(5) by the addition immediately after subsection (9) of
that section, of the following new subsection :—
“(10) The amount of input tax allowable under
the preceding provisions of this section for any
taxable period, shall be further restricted to a lesser
amount of eighty five per centum of the output tax
declared for that taxable period or the input tax
allowable under the provisions of this Act. The
residue, if any, of allowable input tax including the
excess input tax as at December 31, 2006, in the case
of a registered person who imports goods for re-sale
without processing referred to in the third proviso to
subsection (5) of section 22 restricted to eighty-five
per centum, shall be deemed to be a part of the input
tax allowable in the subsequent taxable period or
periods, subject however to the same restriction:
Provided however, the above restriction shall not
apply in relation to input tax attributable to—
(i) supplies which are zero rated;
(ii) supplies on which the tax is differed under
this Act, being supplies; made to exporters
registered with Textile Quota Board
established under the Textile Quota Board
Act, No. 33 of 1996 or with the Export
Development Board extablished under the
Export Development Act, No. 40 of 1979, by
a registered person with the Textile Quota
Board or the Export Development Board as
the case may be, referred to in paragraph (c)
of subsection (2) of section 2; and
(iii) project related goods or services during the
project implementation period, incurred by a
person who is registered under subsection (7)
of section 22.”.
4 Value Added Tax (Amendment)
Act, No. 14 of 2007
Amendment of 5. Section 25 of the principal enactment is hereby
section 25 of the amended in subsection (1) of that section by the substitution
principal
enactment. for the words “so undercharged or overcharged.” of the words,
“so undercharged or over charged :
Provided however, the adjustment in respect of input tax
under claimed on an original tax invoice shall be made
in respect of a tax debit note or a tax credit note issued
not later than six months after the issue of the original
tax invoice, to which the tax debit note or the tax credit
note relates.”.
Insertion of new 6. The following new Chapter is hereby inserted
Chapter IIIB in immediately after Chapter IIIA of the principal enactment
the principal and shall have effect as Chapter IIIB (sections 25H and 25I) of
enactment.
that enactment :—
“CHAPTER IIIB
Imposition 25H. (1) A tax (hereinafter referred to as
of optional “optional value added tax”) shall be charged
value added on the aggregate turnover from each taxable
tax.
activity carried on, or carried out, in Sri Lanka
by a person or a partnership, if such person or
partnership is registered under this Chapter in
accordance with the provisions of this Chapter
for every quarter commencing on or after
January 1, 2007, at the rate of five per centum.
(2) For the purposes of this Chapter
“turnover” in relation to any taxable activity
means the total amount received or receivable
from transactions entered into in respect of the
taxable activities carried on, or carried out, in
Sri Lanka, other than any supply specified in
the First Schedule, or zero rated supplies
referred to under section 7, or supplies referred
to in section 3 of the Act or to the sale of any
capital assets.
Value Added Tax (Amendment) 5
Act, No. 14 of 2007
(3) In this subseciton —
“capital assets” shall have the same meaning as is
given to it in section 25 of the Inland Revenue
Act, No. 10 of 2006.
“quarter’ means the period of three months
commencing on the first day of January, the first
day of April, the first day of July and the first day
of October of each year.
Registration. 25I. (1) A person or a partnership referred to
in subsection (2), may apply for registration
under this Chapter and—
(a) the Commissioner General shall, if he is
satisfied that the conditions specified in
subparagraphs (i) and (ii) of paragraph (a)
of subsection (2) are complied with,
register such person or partnership on a
request made for registration and shall
forthwith assign a registration number to
such person or partnership;
(b) such registration shall be valid for a period
of three years from the date of
commencement of the quarter in which the
registration is obtained or up to the end of
the quarter in which the aggregate turnover
of such person or partnership exceeds
rupees two million and five hundred
thousand per year, whichever occurs first.
(2) (a) the provisions of subsection (1) shall
apply to any person or partnership—
(i) whose agregate turnover from every
taxable activity carried on or carried out,
does not exceed rupees two million and
five hundred thousand per year or six
hundred and twenty five thousand per
quarter; and
6 Value Added Tax (Amendment)
Act, No. 14 of 2007
(ii) who or which is not registered under
Chapter II.
(b) Any person or partnership registered
under this Chapter may apply to the
Commissioner-General to cancel such
registration and further request the
Commissioner-General to register him under
Chapter II, at any time during the period in
which registration under this Chapter subsists.
(c) The provisions of Chapters I, II, III or
IIIA shall not apply to a person or partnership
whose registration during the period is
subsisting under this Chapter.”.
Insertion of new 7. The following new section is hereby inserted
section 26A in immediately after section 26 of the principal enactment and
the principal
shall have effect as section 26A of that enactment :—
enactment.
“Deduction 26A. (1) Every Government Agency which
of tax from makes payment in pursuance of a contract to
payments. which such Agency is a party or on behalf of
any other person who is a party to a contract
shall, deduct from such payment one- third of
the tax included in such payment, and the
amount of tax so deducted shall be a debt due
from such Government Agency to the Republic
and shall be recoverable forthwith or may be
assessed and charged upon such Government
Agency in addition to any tax, if any, otherwise
payable by such Government Agency under this
Act :
Provided that no such deduction shall be
made —
(i) where the total consideration for the
performance of such contract does not
exceed five hundred thousand rupees
excluding the Value Added Tax; or
Value Added Tax (Amendment) 7
Act, No. 14 of 2007
(ii) where the payment made is an immediate
settlement for the goods supplied on
contract ; or
(iii) where the Commissioner-General is of the
opinion that deduction is impracticable
or inexpedient having regard to all the
circumstances of the case.
(2) Any Government Agency who deducts tax
in accordance with the provisions of subsection
(1) shall —
(a) issue to the person from whose payment
the deduction is made, a Certificate
showing —
(i) the gross amount of payment ;
(ii) the total tax and the amount of
one-third of the tax so deducted ;
and
(iii) the net amount actually paid; and
(b) remit the tax so deducted in any calendar
month on or before the end of the first week
of the subsequent month to the
Commissioner-General together with the
statement showing—
(i) the name and address of the person
to whom the payment was made
and the registration number of such
person ;
(ii) the gross amount of such
payment;
8 Value Added Tax (Amendment)
Act, No. 14 of 2007
(iii) the total tax, one-third of the tax
deducted and the amount
actually paid ;
(iv) the name and address of the
Government Agency who made
the payment and the registration
number, if any ; and
(v) details of remittances, the cheque
numbers and the date of payment.
(3) Where the taxable supplies of a person
includes a sum from which tax has been
deducted and remitted in accordance with
subsection (1) and (2), he shall be entitled on
production of the Certificate relating to such
sum issued in accordance with subsection (2),
to set off against the tax payable by him the
amount shown in the Certificate as the amount
of tax deducted.
(4) For the purposes of this section
“contract” means —
(i) any contract in respect of construction
work or services of whatever nature not
being a contract of employment ;
(ii) any contract for the supply of goods or
services in respect of any contract
specified in sub-paragraph (i) ;
(iii) any sub contract in respect of any
contract specified in sub-paragraphs (i)
or (ii); or
(iv) any contract for the provision of
services including a contract for the
Value Added Tax (Amendment) 9
Act, No. 14 of 2007
provision of services as an entertainer or
artist other than a contract of
employment.
(5) For the purposes of this section
“Government Agency” means any Ministry,
Department, Government Owned Business
Undertaking, public corporation, Provincial
Council, local authority, University, State bank,
project funded by any Government institution
for which funds are provided from the
Consolidated Fund and the Board of Investment.
(6) Where any person fails to deduct tax in
terms of subsection (1) or fails to remit under
sub section (2) any tax payable to the
Commissioner General, such tax shall be deemed
to be in default and the provision of this Act
relating to the recovery of tax shall accordingly
apply on any such default tax.
(7) Any person who has made any deduction
under subsection (1) or any remittance in
pursuance of subsection (2) shall be deemed to
have acted under the authority of the person by
whom the tax was payable and of all other
persons concerned, and is hereby indemnified
in respect of such deduction or remittances as
the case may be, against all proceedings, civil or
criminal, notwithstanding the provision of any
written law, contract or agreement.
8. Section 76 of the principal enactment is hereby Amendment of
amended, in the third proviso to subsection (1) of that section section 76 of
the principal
by the substitution for the words “ if such supply subsequently enactment.
becomes an exempt supply except in the case of providing
leasing facilities for three wheelers” of the words and figures
“if such supply becomes an exempt supply on or before
December 31, 2006.”.
10 Value Added Tax (Amendment)
Act, No. 14 of 2007
Amendment of 9. The First Schedule to the principal enactment is
the First
hereby amended in PART II as follows :—
Schedule to the
principal
enactment. (1) in paragraph (a) of that Schedule —
(a) in item (vi) by the substitution for the words
“aviation fuel and oil for ships ; ” of the
words and figures “aviation fuel, oil for ships
or fuel oil specified under Harmonized of
Commodity Description Number
2710.19.60.”;
(b) in item (vii) by the substitution for the words
“and Braille writing boards” of the words
“Braille writing boards and any other articles
which are used by disabled persons which
are approved by Minister, taking into
consideration the degree of relief requested
by such persons, on an application made for
that purpose.”;
(c) by the addition immediately after item (xiv)
of the following :—
“(xv) prawns.” ;
(2) in paragraph (b) thereof:—
(a) by the addition, immediately after item (xvi)
of the following :—
“(xvii) any film, for distribution or exhibition
(xviii) laboratory facilities for production of
any film ;
(xix) locally manufactured handloom
textiles ;
Value Added Tax (Amendment) 11
Act, No. 14 of 2007
(xx) locally manufactured coconut oil ;
(xxi) services being chartering of any
vessel;”;
(b) by the substitution in item (i) (a) for words
“that followed the Government curricula ; and”
of the words “that followed the Government
curricula other than any service not within the
context of educational services or any part of
such educational services not within the
Government curricula;”; and
(c) by the repeal of item (ii) and substitution
therefor of the following :—
“(ii) (a) public passengers transport services
(other than air transport, water
transport or transport of tourists,
excursion tours and taxi
services);or
(b) the provision of leasing facilities
for—
A. such motor coaches with a
seating capacity not less than
twenty eight passenger seats
and used for such public
passenger transport services if
such lease agreement is
entered into prior to January
1, 2004;
B. three wheelers in respect of
rental falling due for payment
on or after January 1, 2005 ;
C. any bus referred to in item (xv)
of paragraph (c).”;
12 Value Added Tax (Amendment)
Act, No. 14 of 2007
(d) by the repeal of item (iii) and the substitution
therefor of the following:—
(iii) electricity including distribution.”.
(3) in paragraph (c) thereof, by the addition, immediately
after item (xii) of the following :—
(xiii) any machinery or equipment by the Ceylon
Electricity Board or an Institution which has
entered into an agreement with the Ceylon
Electricity Board to supply electricity required
for the purpose of generating electricity
identified under specified Harmonized
Commodity of Description Numbers for
custom purposes, approved by the Minister ;
(xiv) any film which is produced in Sri Lanka and
sent abroad for further processing or printing,
with the approval of the Chairman of the
National Film Corporation ;
(xv) any bus by the holder of any valid passenger
service permit issued by the National Transport
Commission or any Provincial Road Passenger
Transport Authority for the replacement of a
bus which is being used for the transport of
passengers and which has been so used for
not less than five years at the time of such
import ;
(xvi) machinery identified under the specified
Harmonised of Commodity Description
Numbers for Custom purposes, for
modernization of factories by the factory
owner with the approval of the Commissioner-
General of Inland Revenue ;
Value Added Tax (Amendment) 13
Act, No. 14 of 2007
(xvii) poultry keeping machinery, poultry
incubators and brooders, the import of cattle,
buffaloes, poultry, pigs, goats, sheep for
breeding purposes and the seimen and
embryos of such animals for breeding
purposes, under the specified Harrmonised of
Commodity Description Numbers for the
Custom purposes, with the approval of the
Commissioner-General of Inland Revenue ;
(xviii) finished leather to be used for the shoe
manufacturing industry, on the
recommendation of the Secretary to the
Ministry of Industrial Development subject
to approval by the Minister in charge of the
subject of Finance.”.
10. Third Schedule to the principal enactment is hereby Amendment
amended as follows :— of the Third
Schedule to
the principal
(1) by the substitution for the words “the supply or cnactment.
import of-” of the words and figures “(1) The supply
or import of–”;
(2) by the deletion of item (vi), and the renumbering of
item (vii) as item (vi);
(3) by the insertion immediately after item (vi) of the
following new items :—
“(vii) high-tec medical equipment or any
machinery used for the manufacture of ticket
issuing machinery identified, by the
Commissioner-General of Inland Revenue
under the specified Harmonized of
Commodity Description Numbers for
Custom purposes;
(viii) jewellery;”; and
14 Value Added Tax (Amendment)
Act, No. 14 of 2007
(4) by the addition immediately after item (viii) of the
following :—
“(2) The import of cine films, cinematographic
films exposed and developed, magnetic cine
sound recorders, cinematographic cameras
and projector, parts and accessories, apparatus
and equipments for cinematographic
laboratories, identified by the Commissioner
General of Inland Revenue under the specified
Harmonized of Commodity Description
Numbers for Custom purposes, with the
approval of the Chairman, National Film
Corporation.”.
Retrospective 11. (1) The amendments made to the principal
effect. enactment by the provisions of this Act, except the
incorporation of the exemption by item (xx) to paragraph (b)
of the First Schedule, shall be deemed for all purposes to
have come into effect on January 1, 2007.
(2) The exemption incorporated in item (xx) to paragraph
(b) shall be deemed for all purposes to have come into effect
on July 1, 2006.
Indemnity. 12. Any person who collects the value added tax as
provided for in this Act, during the period commencing
January 1, 2007 and ending on the date of the coming into
operation of this Act, shall be deemed to have acted with due
authority and such collection shall be deemed for all purposes
to have been, and to be, validly made and such person is
hereby indemnified against all actions civil or criminal in
respect of such collection.
Sinhala text to 13. In the event of any inconsistency between the
prevail in case of Sinhala and Tamil texts of this Act, the Sinhala text shall
inconsistency.
prevail.

Value Added Tax (Amendment) 15
Act, No. 14 of 2007
Annual subscription of English Bills and Acts of the Parliament Rs. 885 (Local), Rs. 1,180
(Foreign), payable to the SUPERINTENDENT, GOVERNMENT PUBLICATIONS BUREAU, NO. 32, TRANSWORKS
HOUSE, LOTUS ROAD, COLOMBO 01 before 15th December each year in respect of the year following.
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