Act No 07 OF 2012

Act-No-7of2012-Value-Added-Tax-Amendment.pdf
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PARLIAMENT OF THE DEMOCRATIC
SOCIALIST REPUBLIC OF
SRI LANKA
VALUE ADDED TAX (AMENDMENT)
ACT, NO. 7 OF 2012
[Certified on 30th March, 2012]
Printed on the Order of Government
Published as a Supplement to Part II of the Gazette of the Democratic
Socialist Republic of Sri Lanka of March 30, 2012
PRINTEDATTHE DEPARTMENTOFGOVERNMENTPRINTING,SRILANKA
TO BEPURCHASED AT THE GOVERNMENT PUBLICATIONS BUREAU, COLOMBO 5
Price : Rs. 11.00 Postage : Rs. 10.00

Value Added Tax (Amendment) 1
Act, No. 7 of 2012
[Certified on 30th March, 2012]
L.D.– O. 9/2012
AN ACT TO AMEND THE VALUE ADDED TAX ACT, NO. 14 OF 2002
BE it enacted by the Democratic Socialist Republic of Sri
Lanka as follows:-
1. This Act may be cited as the Value Added Tax Short title and
(Amendment) Act, No. 7 of 2012 and shall be deemed to date of operation.
have come into operation on January 1, 2012 unless different
dates of operation are specified therefor, in the relevant
sections.
2. Section 2 of the Value Added Tax Act, No.14 of 2002 Amendment of
section 2 of the
(hereinafter referred to as the “principal enactment”) is hereby
Value Added Tax
amended as follows:- Act, No.14 of
2002.
(1) in subsection (2) of that section:-
(a) by the repeal of item (i) of sub-paragraph
(e) and the substitution therefor of the
following:-
“ (i) a person engaged in any Strategic
Development Project in terms of
subsection (4) of section 3 of the
Strategic Development Projects Act,
No.14 of 2008, as is referred to in
sub-paragraph (i) of paragraph
(f) of Part II of the First Schedule,
during the project implementation
period, or a registered person engaged
in any specific project referred to in
sub-paragraph (ii) of paragraph (f) of
PART II of the First Schedule (effective
from April 1, 2011)”;
2—PL 006653—6,615 (03/2012)
2 Value Added Tax (Amendment)
Act, No. 7 of 2012
(2) by the addition immediately after item (iv) thereof,
of the following:-
“(v) any registered person who supplies any
goods or services on or after April 1,
2011, to any registered person referred
to in items (i), (ii), (iii) or (iv) above,
provided that the Commissioner –
General is, on the information available,
satisfied that the value of such supplies
exceeds fifty per-centum of the total
supplies of such registered person who
supplies such goods or services.”;
(3) by the addition immediately after paragraph (c) of
the second proviso to subsection (3) of that section
of the following:-
“(d) plant, machinery or equipment imported
by any enterprise qualified for a tax
exemption under section16D and 17A of
the Inland Revenue Act, No. 10 of 2006,
for the use by such enterprise for the
purposes specified in any agreement
entered into with the Board of
Investment of Sri Lanka established
under the Board of Investment of Sri
Lanka Law, No. 4 of 1978, where any
such agreement provides that tax is
exempted under item (xxxiv) of
paragraph (c) of PART II of the First
Schedule, during the project
implementation period, subject to the
fulfillment of the conditions specified
in the agreement.”.
Amendment of 3. Section 22 of the principal enactment is hereby
section 22 of the amended as follows:-
principal
enactment.
(1) in subsection (1) of that section, by the repeal of
Value Added Tax (Amendment) 3
Act, No. 7 of 2012
the first proviso thereof and the substitution
therefor of the following:-
“ Provided that, the amount of tax due on the supply of-
(a) garments within such percentage-
(i) as is permitted for sale locally by the
Board of Investment of Sri Lanka,
established by the Board of Investments
of Sri Lanka Law, No. 4 of 1978 under
any agreement entered into by the
manufacturer of garments for export
under section 17 of the aforesaid law;
or
(ii) as is permitted for sale locally by the
Board of Investment of Sri Lanka,
established by the Board of Investments
of Sri Lanka Law, No. 4 of 1978, by any
other garment manufacturer who
manufactures garments for export under
the supervision of the Department of
Customs ,
shall be rupees twenty five for each such
garment so supplied within Sri Lanka;
(b) fabric within such percentage –
(i) as is permitted for sale locally by the
Board of Investment of Sri Lanka,
established by the Board of Investment
of Sri Lanka Law, No. 4 of 1978, under
any agreement entered into by the
manufacturer of fabric for export under
section 17 of the aforesaid law; or
(ii) as is permitted for sale locally by the
Board of Investment of Sri Lanka,
established by the aforesaid law by any
4 Value Added Tax (Amendment)
Act, No. 7 of 2012
other fabric manufacturer who
manufactures fabric for export under the
supervision of the Department of
Customs,
shall be forty rupees per kilogram.”;
(2) in the second proviso to subsection (1), by the
substitution for the words and figures “no other tax
or levy including any duty under the Customs
Ordinance (Chapter 235) or Cess under subsection
(1) of section 14 of Sri Lanka Export Development
Act, No. 40 of 1979, shall be charged or collected
on such sale of garments,” of the words and
figures “no other tax or levy payable at the point of
entry into the country including any duty under
the Customs Ordinance (Chapter 235) or Cess
under subsection (1) of section 14 of Sri Lanka
Export Development Act, No. 40 of 1979, shall be
charged or collected on such sale of garments or
fabric.”;
(3) in paragraph (e) of the second proviso to subsection
(5) of that section by the substitution for all the
words from “there is an excess of input tax” to the
words “taxable supplies of the taxable period” of
the following:-
“there is an excess of input tax including tax
deferred under section 2, of any registered person
who is registered with the Textile Quota Board
established under the Textile Quota Board Act,
No. 23 of 1996, being a supplier of goods or services
to any registered person referred to in paragraph (c)
of subsection (2) of section 2 or any registered person
who is registered with the Export Development
Board, who was subsequently brought under the
deferment scheme administered by the
Commissioner-General under paragraph (e) of
subsection (2) with effect from April 1, 2011, being
a supplier of goods to exporters of goods, referred
to in paragraph (d) of subsection (2) of section 2,
Value Added Tax (Amendment) 5
Act, No. 7 of 2012
the value of supplies to suppliers referred to in
paragraph (c), (d) or in the corresponding provisions
of paragraph (e) for the taxable period was more
than fifty per centum.”;
(4) in the third proviso to subsection (5) of that section
by the substitution for all the words from “Provided
further" to the words "shall be carried forward." of
the following:—
“Provided further, in case of a registered
person who imports goods for re-sale without
processing, the excess input tax representing the
tax paid under subsection (3) of section 2 shall not
be refunded, but such input tax including any
excess input tax as at July 31, 2002, under the
Goods and Services Tax Act, No. 34 of 1996 shall
be carried forward except in a case where such
supplies are made to any registered person referred
to in items (i), (ii), (iii) or (iv) of paragraph (e) of
subsection (2) of section 2 of this Act, subject to
the conditions and the limitations specified in the
guidelines published for the purposes of applying
the deferment for the specified period.”;
(5) in subsection (10) of that section:-
(i) in paragraph (a), by the substitution for the
words and figures “The unabsorbed residue, if
any, as at December 31, 2010 shall be carried
forward and may be claimed by a registered
person for any taxable period not exceeding a
sum equivalent to ten per centum of the
unabsorbed amount for each month, provided
that, such sum does not exceed five per centum
of the net tax payable after deducting
allowable input credit from the output tax by
such person;” of the following:-
“The unabsorbed residue, if any, as at
December 31, 2010 shall be carried
6 Value Added Tax (Amendment)
Act, No. 7 of 2012
forward and may be claimed by a registered
person for any taxable period –
(A) commencing on or after January
1, 2011 but prior to January 1,
2012, not exceeding a sum
equivalent to ten percentum of the
unabsorbed amount for each
month, but not exceeding five
per centum of the net tax payable
after deducting allowable input
credit from the output tax payable
by such person;
(B) commencing on or after January
1, 2012, not exceeding a sum
equivalent to ten per centum of the
unabsorbed amount for each
month but not exceeding the net
tax payable after deducting
allowable input credit from the
output tax by such person;”;
(ii) by the repeal of the first proviso to that
subsection and the substitution therefor of the
following:-
“Provided that, in the case of a registered person –
(A) who as at December 31, 2010, has an
unabsorbed input credit, but from and after
January 1, 2011, such person has no
taxable supplies liable to tax under the
provisions of this Act; or
(B) where in respect of each month with effect
from January 1, 2012, the actual set off of
the unabsorbed input credit of such person,
not exceeding ten per centum of the
unabsorbed input credit as at December
Value Added Tax (Amendment) 7
Act, No. 7 of 2012
31, 2010, the excess over the amount set
off, as is referred to in sub-paragraph (B)
of paragraph (a) of subsection (10),
may be set off after ascertaining the amount of
the unabsorbed input credit in the folowing
manner:–
(i) for any taxable period commencing on or
after January 1, 2011 but prior to January
1, 2012, in the manner provided for in
either paragraph (a), paragraph (b),
paragraph (c) or (d), as the case may be-
(a) in the case of a registered person who
is an operator of a telecommunication
services licensed under section 17 of
the Sri Lanka Telecommunication
Act, No. 25 of 1991, the set off may
be made as against the sum payable
by him as Telecommunication
Levy payable under the
Telecommunication Levy Act, No. 21
of 2011;
(b) in the case of a registered person who
is liable to pay income tax, the set
off may be made as against the sum
payable by such person as income
tax after January 1, 2011;
(c) in the case of a person to whom the
provisions of either paragraph (a) or
(b) above does not apply, the set off
shall be made against the sum
payable after January 1, 2011, by
such person as tax under any written
law for the time being in force,
8 Value Added Tax (Amendment)
Act, No. 7 of 2012
administered by the Commissioner
– General;
(d) in the case of a person to whom the
provisions of either paragraph (a), (b),
or (c) above does not apply, the set
off may be considered against the tax
payable at the point of entry into the
country, by the Director-General of
Customs after July 13, 2011 with the
approval of the Commissioner-
General after considering the facts of
the case;
(ii) for any taxable period commencing
on or after January 1, 2012, against
the tax payable in the manner
provided for in either paragraph (a),
paragraph (b) or paragraph (c) below,
as the case may be:-
(a) in the case of a registered person
who is an operator of a
telecommunication services
licensed under section 17 of the
Sri Lanka Telecommunication
Act, No. 25 of 1991, the set off
may be made as against the sum
payable by him as
Telecommunication Levy
payable under the
Telecommunication Levy Act,
No. 21 of 2011; or
(b) in the case of a registered
person who is liable to pay
any tax administered by the
Commissioner – General of Inland
Revenue, the set off may be made
against the sum payable after
January 1, 2012, by such person
as tax under any written law
for the time being in force,
Value Added Tax (Amendment) 9
Act, No. 7 of 2012
administered by the Commissioner
– General; and
(c) in the case of a registered person
to whom the provisions under
paragraph (a) and (b) above do not
apply, the set off may be
considered against the tax payable
at the point of entry into the
country, by the Director-General
of Customs after January 1, 2012
with the approval of the
Commissioner- General after
considering the facts of the case.
The set off for each month, against the tax payable in
terms of this subsection–
(i) where such set off is applicable to any
taxable period from January 1, 2011 but
prior to January 1, 2012 shall not exceed
ten per centum of the unabsorbed input
credit as at December 31, 2010 or five per
centum of the relevant tax liability, which
ever is less;
(ii) where such set off is applicable to any
taxable period commerncing on or after
January 1, 2011 shall not exceed ten per
centum of the unabsorbed input credit as
at December 31, 2010 or the net
unabsorbed balance as at December 31,
2011 after setting off the tax payable
during the period of twelve months from
the total unabsorbed balance as at
December 31, 2010, which ever is less.”.
4. Section 25A of the principal enactment is hereby Amendment
amended in paragraph (iv) of subsection (1) of that section of section
by the substitution for the words and figures “commencing 25A of the
principal
on or after January 1, 2009.” of the words and figures,
enactment.
"commencing on or after January 1, 2009:
10 Value Added Tax (Amendment)
Act, No. 7 of 2012
Provided however, the supply of financial services
by a Unit Trust or a Mutual Fund shall not be treated
as a financial service for the purpose of this section.”.
Amendment of 5. The First Schedule to the principal enactment is
the first schedule hereby amended in PART II thereof as follows:-
to the principal
enactment.
(1) in paragraph (a) of that PART :-
(i) by the repeal of item (x) and substitution
therefor of the following item:-
“(x) agricultural machinery,
mammoties, forks, fertilizer
(effective from 01.07.2004),
artemia eggs and peat moss
classified under the Harmonized
Commodity Description and
Coding System Numbers for
Custom proposes;";
(ii) in item (xii), by the substitution for the
words and figures “machinery used for
construction industry imported not later
than December 31, 2010” of the words
and figures “machinery used for the
construction industry,”;
(iii) by the addition immediately after item
(xxi) of the following:-
"(xxii) (i) lorries, trucks, buses, sports
equipments, machinery used
for the production of rubber
or plastic products,
sunglasses, perfumes,
moulding ( steel, glass, rubber
or plastic), photo sensitive
semi conductor devices;
Value Added Tax (Amendment) 11
Act, No. 7 of 2012
(ii) raw materials for the
manufacture of spectacles
and spectacle frames ;
(iii) items and spares for the
poultry industry;
(iv) wood (sawn);
(v) fabric for domestic
consumption subject to a
cess at a specific rate in lieu
of chargeability of any
other tax payable on
importation at the point of
entry into the country, as
specified in a Gazette
Notification issued under
the Sri Lanka Export
Development Act, No. 40 of
1979,
classified under the Harmonized
Commodity Description and
Coding System Numbers for
Custom purposes;
(xxiii) goods for any international
event approved by the Minister
of Finance taking into
consideration the economic
benefit to the country, by
conducting such event in Sri
Lanka.”;
(2) in paragraph (b) of that PART:-
(i) in sub-paragraph (A), by the repeal of
item (ii) and the substitution therefor of
the following ;–
“(ii) lorries, tractors or motor
coaches with a seating capacity
of not less than twenty eight
12 Value Added Tax (Amendment)
Act, No. 7 of 2012
passenger seats, in respect of any
rental falling due for payment
on or after April 1, 2012.”;
(ii) by the repeal of item (xiii) and the
substitution therefor of the following:-
“( xiii) imported unprocessed timber
logs or ships or any article
subject to the Special
Commodity Levy under Special
Commodity Levy Act, No. 48 of
2007 subject to the condition
that such Nation Building Tax
referred to in paragraph (d) of
subsection (10 ) of section 2 of
the Nation Building Tax Act,
No. 9 of 2009, shall be payable
in respect of such article.”;
(iii) by the addition immediately after item
(xxxv) of the following:-
“(xxxvi) locally manufactured–
(i) hydropower or wind power
machinery and
equipment;
(ii) turbines;
(iii) canned fish or clay
pottery products using
locally produced raw
materials;
(iv) products using locally
procured raw materials for
the required specification
of tourist hotels or airlines;
Value Added Tax (Amendment) 13
Act, No. 7 of 2012
(v) specified products to
identified state
institutions replacing
imports,
by the manufacturer in so far
as such products are locally
value added products, as per
the conditions specified in the
guidelines issued for this
purpose;
(xxxvii)(i) locally manufactured
fabric in the domestic
market by any
manufacturer who does not
enjoy any concessions
under any agreement
entered into with the Board
of Investment of Sri Lanka;
(ii) fabric which are subject to
a cess at a specific rate
classified under the
Harmonized Commodity
Description and Coding
System Numbers for
Custom proposes, in lieu of
chargeability of any other
tax on importation at the
point of entry into the
country, by the Director-
General of Customs as
specified in a Gazette
Notification issued under
the Sri Lanka Export
Development Act, No. 40
of 1979;
14 Value Added Tax (Amendment)
Act, No. 7 of 2012
(xxxviii) services, being research and
development services provided by the
supplier of such services within the
meaning of the Inland Revenue Act,
No.10 of 2006 for the purposes of
deduction under section 25 of that Act;
(xxxix) painting, at the point of sale, by the
artist thereof;
(xL) services, by the Department of
Commerce, with effect from January 1,
2012, services by the Board of
Investment of Sri Lanka or the Sri Lanka
Ports Authority, with effect from April
1, 2012, in so far as such services are
provided to exporters or to providers of
services which are zero rated services,
for the purposes of tax under this Act;
(xLi) being any sum paid out of the Export
Development Fund as export
development rebate with effect from
October 8, 2009;
(xLii) specific services for any international
event approved by the Minister of
Finance having taken into
consideration the economic benefit to
the country by conducting such an
event in Sri Lanka;
(xLiii) services, which result in the
improvement of quality, character or
value of any fabric or garment with
effect from April 1, 2012;
(xLiv) locally manufactured palm oil, with
effect from April 1, 2012.”;
Value Added Tax (Amendment) 15
Act, No. 7 of 2012
(3) in paragraph (c ) of that PART :-
(a) by the repeal of item (xxiii) and the
substitution therefor of the following:-
“(xxiii) goods, for a project identified
as a strategic development
project under the provisions
of the Strategic Development
Project Act, No.14 of 2008,
during the project
implementation period,
subject to the conditions
specified therein or with the
approval of the Minister of
Finance any special project
referred to in paragraph (f);”;
(b) in item (xxviii), by the substitution for
the words “discharge lamps and arc lamp
carbon" of the words and figures
"discharge lamps, arc lamp carbon,
speakers, amplifiers, digital stereo
processors and accessories, cinema
media players and digital readers”;
(c) by the addition immediately after item
(xxx) of the following:-
“(xxxi) pharmaceutical machinery
and spare parts for the
pharmaceutical machinery
which are not manufactured in
Sri Lanka, classified under the
Harmonized Commodity
Description and Coding
System Numbers for Custom
proposes, imported by
pharmaceutical manufacturers
16 Value Added Tax (Amendment)
Act, No. 7 of 2012
and recommended by the
Secretary to the Ministry
of Health, including
pharmaceutical machinery or
parts imported after June 1,
2011 under the same
conditions on which Value
Added Tax has been deferred;
(xxxii) machinery for the
manufacture of bio mass
briquettes and pallets so far
as such machinery is imported
by the manufacturer of such
products classified under the
Harmonized Commodity
Description and Coding
System Numbers for Custom
proposes, including such
machinery imported after
June 1, 2011 under the same
conditions on which Value
Added Tax has been deferred;
(xxxiii) green houses, poly tunnels
and materials for the
construction of green houses,
by any grower of agricultural
products or plants of any type,
subject to the condition that
such items are not
manufactured in Sri Lanka,
and approved by the
Director-General, Department
of Fiscal Policy on the
recommendation of the
Secretary to the Ministry of
Agriculture;
Value Added Tax (Amendment) 17
Act, No. 7 of 2012
(xxxiv) plant, machinery or
equipment by any enterprise
qualified for a tax exemption
under section 16D and17A of
the Inland Revenue Act, No.
10 of 2006, for the use by such
enterprise for the purposes
specified in the agreement
entered into with the Board of
Investment of Sri Lanka on
which tax is deferred during
the project implementation
period, subject to the
fulfillment of the conditions
specified in the agreement,
during the project
implementation period;
(xxxv) any goods, ( other than motor
vehicles and goods for
personal use) required for
the purpose of provision of
services being international
transportation which is
consigned to Sri Lankan Air
Lines Limited, Mihin Lanka
(Pvt) Ltd. or Air Lanka
Catering Services Ltd. ;
(xxxvi) fabric, specified under the
Harmonized Commodity
Description and Coding
System Numbers for Custom
proposes, for the sale in the
domestic market without any
value addition, subject to
the chargeability of a cess
of rupees seventy five per
kilogram on importation .”.
18 Value Added Tax (Amendment)
Act, No. 7 of 2012
Indemnity. 6. Any person who collects the Value Added Tax as
provided for in this Act during any period prior to the date
of coming into operation of this Act, shall be deemed to
have acted with due authority and such collection shall be
deemed 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 7. 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) 19
Act, No. 7 of 2012
Annual subscription of English Bills and Acts of the Parliament Rs. 885 (Local), Rs. 1,180
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GOVERNMENT INFORMATION, NO. 163, KIRULAPONA MAWATHA, POLHENGODA, COLOMBO 05 before 15th
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