Value Added Tax

(1) Subject to the provisions of this Act, a tax, to be known as the Value Added Tax(hereinafter referred to as “the tax”) shall be charged

and on the value of such goods or services supplied or the goods imported, as the case may be, subject to the provisions of section 2A, at the following rates:

The Tax Fraction referred to above shall be applied to ascertain the amount of tax charged in the case of a tax inclusive consideration:

Provided, however the Commissioner-General shall not collect the tax under subsection(1)where the tax is-

Provided further the tax payable on any taxable supply made on or after January 1, 2004, being a supply under in agreement which is not subject to review not being a hire purchase agreement, entered into on or before December 31, 2003, and where such supply has been specifically identified within such agreement shall be computed at the tax rate prevailing at the time of entering into such agreement notwithstanding the provisions of subsection (9) of section 5.

(2) Notwithstanding the provisions of subsection (1) the Commissioner-General shall defer the payment of tax due”

(3)The tax on the importation of goods, shall be charged, levied and collected as if it is a customs duty and as if all goods imported into Sri Lanka are dutiable and liable to customs duty :

Provided however, no tax shall be charged on

Provided further, the Director-General of Customs may, defer the payment of the tax due on

for a period of sixty days or such other period not exceeding ninety days from the date of importation receipt oil purchase oil such goods, as may be determined by the Minister by notification published in the Gazette

The deferment of the payment of tax shall be subject to a furnishing of a bank guarantee or a corporate guarantee which covers the amount of tax due on the goods imported, received or purchased. In the case of such deferment under paragraph (b) no guarantee shall be required where such goods have been imported by a Government institution to be re-exported within one month from the date of importation.

(1) The Minister may by Order vary the rates specified in section 2 insofar as the same relates to the increasing or reducing of the rates previously specified, and to such extent as it relates to the imposition of Value Added Tax specified under the aforesaid section.

(2) The Order made by the Minister under subsection (1) shall be in ‘ operation immediately upon the Minister affixing his signature thereto.

(3) Every such Order shall as soon as convenient be published in the Gazette.

(4) Every such Order shall as soon as convenient thereafter be approved by a Resolution of Parliament.

(5) Where any such Order is not approved by Parliament it shall be deemed to be rescinded with effect from the date of such Resolution”.

(a)a manufacturer of such goods ; or

(b)an importer of such goods ; or

(c) a supplier who is unable to satisfy the Commissioner-General, as to the source from which the goods supplied by him, were acquired; or

(d) any person, where such goods consists of tea purchased on or after August 1,2002 but prior to January 1, 2005 at an auction as is referred to in paragraph (a) of subsection (2) of section 2 for sale within Sri Lanka;

“(e) any person, who supplies such goods under any tender agreement.”.

(a)any registered person makes an application to that effect to the Commissioner-General;

(b)any other person makes an application to that effect to the Commissioner-General and obtains a registration as provided for in sections 10 or 12.

(1) The supply of goods shall be deemed to have taken place at the time of the occurrence of any one of the following whichever, occurs earlier :-

(2) Notwithstanding the provisions of paragraph (d) of subsection (I), where an invoice is issued in respect of goods delivered, within ten days from the date of delivery-of such goods, the time of supply of such goods, shall be deemed to be the time at which the invoice was issued.

(3)The supply of services shall be deemed to have taken place, at the time, of the occurance at any of the following whichever occurs earlier –

(4)Notwithstanding the provisions of paragraph (a) of subsection (3), where an invoice is issued in respect of services supplied within ten days from the date of performance of such service shall be deemed to be the time at which the invoice was issued

(5)Not withstanding the provisions of subsections (1 )and (3), a supply shall be deemed to take place

(6)Where the Commissioner General directs any registered person to account for the tax on a payment basis under section 23. the time of supply of goods or services supplied by such person shall be the time at which the payment in respect of such supply is received

(7)Where the time of supply falls within any taxable period or portion of a taxable period ending on or before July 31, 2002. under the Goods and Services Tax Act, No. 34 of 1946 and any event referred to in this section -takes place under this Act in relation to the same supply, such event shall not be considered as a time of supply.

(1) The value of a taxable supply of goods or services shall be such amount where the supply is

(2)Subject to the provisions of subsection (3), where a supply of goods or services is made by a registered person for an amount which is less than the open market value to a person not being a registered person the value of such supply, shall be the open market value of the supply

(3) Where a supply of goods or services is made by an employer, to his employee as a benefit from employment, the consideration in money for the supply shall be the open market value of such supply or where the open market value of such supply cannot be ascertained, the consideration in money of such supply shall he the cost of a similar benefit enjoyed by any other employee, as may be determined by the Assessor.

(4) Where a supply of services is made under any lottery. or any taxable activity of entering into or negotiating a waging con tract or any business of like nature, the value of such supply shall be the total amount of money receivable in respect of such supply less the consideration of the prizes or winnings awarded in such lottery, wagering contract, or any business of like nature as the case may be.

(5)Where a supply of goods or services”

the value of such supply shall be not less than the open market value.

(6)The value of the supply of goods under a hire purchase agreement shall be the cash price determined in accordance with the provisions of the Consumer Credit Act, No. 29 of` 1982, and shall not be less than the open market value :

Provided however in the case of a hire purchase agreement

(7)The value of supply of land and improvements thereon, shall be the value of such supply less the value of land at the time of supply and the value of any improvements on the land as at March 31, 1998 which shall not be Iess than the open market value of such supply excluding the value of such land at the time of supply and the value of any improvements on such land as at March 31, 1998

(8)Where goods or services are supplied either on the issue of a ticket or by the deposit of money the value of such supply shall be the amount paid for such ticket less the tax payable under this Act or the amount deposited less the tax payable under this Act not being any amount which is refundable as the case may be

(9)The value of a supply, under any non reviewable agreement not being a hire purchase agreement entered into prior to April 1, 1998, shall be the total amount payable or paid under such agreement lot any taxable period and shall be considered as a Tax inclusive consideration

(10)Where any goods supplied under a lease agreement is subsequently transferred to the lessee at the termination of such agreement for a consideration not exceeding ten per centum of the total consideration of the lease agreement, such consideration shall be deemed to be a lease rental recovered under such agreement

Further where such consideration is more than ten per centum of the total consideration of the lease agreement such supply shall be deemed to be a separate supply

(11)where the consideration in respect of a supply of goods or services relates to a taxable supply and a supply which is not taxable the consideration for such taxable supply shall be deemed to be such part of the consideration as is attributed lo such taxable supply and shall not be less than the open market value of such taxable supply

(12) Where goods are manufactured or produced or :t service is provided, by using other goods, whether provided by the supplier or any other person, such other goods shall be deemed to be used in the manufacture or production or the provision of service as the case may be, and the value of the supply of the goods so manufactured or produced and the supply of services to connection with such manufacture or production or the supply of the service shall be the open market value or the sum received as consideration for such supply, whichever is higher:

Provided however, where if is proved to the satisfaction of an Assessor that the supply of goods, and the supply of services are two separate supplies, each such .supply shall be treated as a separate supply by such Assessor

(a) the value of the goods determined for the purpose of custom duty increased by seven per centum ; and

(b) the amount of any custom duty payable in respect of such goods with the addition of any surcharge, cess, any Port and Airport Development Levy payable under the Finance Act, No. 11 of 2002, and any excise duty payable under the Excise (Special Provisions) Act, No. 13 of 1989 on such goods.”.

(1) A supply of

(2) Where a registered person supplies any goods or services which is zero rated

(1) Every person who, on or after August 1, 2002 carries on or carries out any taxable activity in Sri Lanka shall be required to be registered under this Act, if-

Provided however, where the Commisssoner-General is of opinion that the supply of goods relate to a single isolated transaction, the value of such supply may be excluded in calculating the total value of taxable supplies for the purposes of this section.

(2) Every person who is required to be registered under subsection (I), shall make an application for registration in the specified form to the Commissioner-General not later than fifteen days from the date on which is so liable to be registered.

For the purpose of this section the total value of taxable supplies shall not include the supplies of any wholesale or retail trading activity excluded from the payment of tax under section 3.

(1) Every person who is an importer of goods into Sri Lanka shall notify the Commissioner-General not later than fourteen days prior to the clearing of such goods that he has imported such goods and obtain from the Commissioner-General an identification number for the clearing of such goods;

Provided however, any importer who imports into Sri Lanka goods under the Passengers Baggage (Exemptions) Regulations made under section 107 of the Customs Ordinance or a person who is registered under section 10 or section 12, or paragraph (c) of section 14, or be deemed to be registered under subsection (2) of section 80 or is deemed to be a registered person under subsection (I) of section 80 of the Goods and Services Tax Act. No. 34 of 1996 shall not be liable to not the Commissioner-General.

(2) Every importer referred to in subsection (I) shall make an application in the specified form to the Commissioner-General.

(1)The Commissioner-General shall-

(2) Any person registered under subsection (1)or deemed to be registered under subsection (2) of section 80 or deemed to be registered under section 75 of the Goods and Services Tax Act No. 34 of 1996 on AUGUST 1, 2002 and where such person is carrying on or carrying out a taxable activity shall be a registered person under this Act

(1) The Commissioner General shall, issue to a person registered under this Act upon such registration under section 14

(2) The Certificate of registration shall set out the name and other relevant details of the registered person, the date on which registration comes into effect, and the tax registration number of such person

(3) The person to whom a Certificate of registration is issued under subsection (1) shall, display such certificate at a conspicuous place in the place where he carries on or carries out the taxable activity. Copies of such certificate may be displayed in the event of there being more than one place of business

(4) Every registered person who makes an exempt supply specified in the 1st Schedule shall display the categories of such goods and services supplied by him as given in the First Schedule at each such place of supply

(5) Where any person fails to comply with the provisions of subsection (3) or (4) the Commissioner General may

within such period as may be specified in such notice

(6) The Commissioner-General may reduce, or annul any penalty imposed on arty person under paragraph (c) of subsection (5) if such person proves to the satisfaction of the Commissioner-General that his failure to comply with the provisions of subsection (3) or (4) was due to circumstances beyond his control and that he has subsequently complied with such provisions.

(1) A registered person may make an application to have his registration cancelled at any time after the lapse of a period of twelve months following the date of registration, either under this Act or under the Goods and Services Tax Act, No. 34 or 1996 where such registered person has ceased to carry on or carry out a taxable activity or the total value of his supplies during any taxable period within such period docs not exceed the value set out in section 10.

(2) The Commissioner-General

and upon being satisfied that the applicant or any registered person as the case may be, has ceased to carry on or carry out a taxable activity or that the total value of his taxable supplies does not exceed the value referred to in section 10. or the facilities under the Customs Ordinance in respect of him have been suspended by the Director-General of Customs or that the continuation of such registration may impede the protection of revenue, cancel his registration.

(3) The Commissioner-General may refuse to cancel the registration of any person where he is of the opinion that such person has not ceased to carry on or carry out a taxable activity or that it is necessary and expedient to continue with his registration for the protection of revenue

(4) Where the Commissioner-General cancels the registration of a Registered person he shall inform such person of the date of cancellation of the registration by registered post

(5)With effect from the date of cancellation of the registration, any goods or services then forming part of the assets of a taxable activity carried on or carried out by that person shall be deemed to be supplied by that person in the course of carrying on or carrying out a taxable activity at a time immediately prior to the date of cancellation., unless the taxable activity (inclusive of all such assets) is carried on or carried out by another person who is a registered person

(1) Where the registration of a registered person has been cancelled by the commissioner General, such person shall-

(2)Where any person fails to comply with the provisions of subsection (t), the Commissioner-General may

(3)The Commissioner-General may reduce, or annul any penalty imposed on any person under paragraph (a) of’ subsection (2) if such person proves to the satisfaction of the Commissioner-General that his failure to comply with she provisions of subsection (1) was due to circumstances beyond his control and that he has subsequently complied with such provisions.

(a)in the name, address and place at which any taxable activity is earned on or carried out by such person ;

(b)in the nature of the taxable activity carried on or carried out by such person ;

(c)in the person authorized to sign returns and other documents ; and

(d)in ownership of the taxable activity.

(1)A registered person who makes a taxable supply shall issue to the person to whom such supply is made, if he has made a written request within fourteen days from the time of supply stating that he is a registered person under this Act or is deemed to be a registered person under this Act, and requires that a tax invoice be issued, a tax invoice shall be issued not later than twenty eight days after the time of such supply;

Provided however where a request has been made by a person registered or deemed to he registered under this Act after the receipt of the first supply such person shall not be required to make any further request in respect of any subsequent supply

(2)The tax invoice shall set out-

Any tax invoice not issued within the period specified in subsection (I) and which does not conform to the provisions of subsection (2) shall not be a valid tax invoice. Any valid tax invoice issued under the Goods and Services Tax Act, No. 34 of 1996 prior to August 1, 2002 or thereafter shall he deemed to be a tax invoice issued under this Act.

(3)Where goods have been imported into Sri Lanka the customs goods declaration or any other document authenticated by the Director-General of Customs shall be treated as a tax invoice under this Act.

Any customs goods declaration or any other document authenticated by the Director-Genera! of Customs and issued under the Goods and Services Tax Act, No. 34 of 1996 prior to August 1, 2002 shall also be treated as a tax invoice.

(4)The original of the tax invoice shall be issued to the person to whom the supply was made and the duplicate of such invoice shall be retained by the person who makes such supply for a period of five years after the expiry of the taxable period in which such invoice was issued.

(5)It shall not be lawful to issue more than one tax invoice for each supply. If a registered person claims to have lost the original tax invoice the person who makes the supply, may issue to such registered person a copy clearly marked “copy only”.

(6)

(7) Any person who contravenes the provisions of subsection (1) shall be guilty of an offence and shall he liable on conviction after summary trial before a Magistrate, to a fine not less than rupees twenty-five thousand and not exceeding rupees two hundred and fifty thousand and thereafter in the event of the offence being continued to be committed, after conviction to a fine of rupees five hundred for each day on which the offence is so continued to be committed.

(8) Where any person convicted of an offence under subsection (7) continues to commit such offence beyond a period of fourteen days from the date of his conviction, the court may, upon an application for closure of the business being made by the Commissioner-General or-any officer authorized in that behalf by the Commissioner-General, order the closure of such business.

(9) In any case where such person fails to comply with the closure order issued under subsection (8), the Magistrate shall forthwith order the fiscal of the court requiring and authorizing such fiscal before a date specified in such order not being a dale earlier than three or later than seven clear days from the date of issue of such order to close such business. Such order shall be sufficient authority for the said fiscal or any police officer authorized by him in that behalf to enter the premises in which the business is carried on or carried out with such assistants as the fiscal or such police officer shall deem necessary to close such business.

(1) Every registered person shall furnish, to the Commissioner-General not later than the fifteenth day of the month not later than the twentieth day of the month after the expiry of each taxable period of each taxable period. Every such return shall be in the specified form and shall contain all such particulars as may be required to be set out in such form :

Provided however, a return for the period of two months commencing from August 1, 2002, shall be furnished not later than the last day of October, 2002 by any person who has been allocated with a taxable period of three months.

(2)An Assessor may, by notice in writing, require any person who is not a registered person but, in his judgment is a person chargeable with tax, to furnish, a return in the specified form within the time specified in such notice.

(3)Any return due under subsections (1) or (3) of section 21 of Goods and Services Tax Act, No. 34 of 1996 for any taxable period commencing prior to August 1, 2002 shall be deemed to be a return due under this Act.

(4)For the purposes of obtaining full information in respect of the supply of goods or services made by any person, an Assessor may give notice in writing to such person requiring him

(5) For the purpose of this Act a Deputy Commissioner may give notice in writing to any person requiring him

(6)A person who attends in compliance with a notice given under subsection (5) may be allowed by the Commissioner-General any reasonable expenses, necessarily incurred by him in so attending

(7)A Deputy Commissioner or an Assessor with the approval of a Deputy Commissioner may retain in his custody as long as such retention is necessary for the purpose of this Act any books of accounts whether contained in a manual mechanical or electronic format or combination thereof, trade lists, stock lists, registers, invoices, cheques, bank statements, paying in slips, accounts, auditors, reports or other documents in his possession as may be specified in order to verify the entries in such books, documents and accounts

(8)An Assessor may give notice in writing to any person where he thinks, it is necessary, requiring him to finish within the time specified in such notice

(9)A return, statement or form purporting to be furnished under this Act by or on behalf of any person shall for all purposes be deemed to have been furnished by that person or by his authority, as the case may be, unless the contrary is proved, and any person signing such return, statement or form shall be deemed to be cognizant of all matters contained therein.

(10)Where any person fails to comply with the provisions of subsection (I), or fails to comply with the requirements of a notice given to such person by an Assessor under subsection (2) directing him to furnish within the time specified in such notice, a return containing such particulars as the Assessor may require, the Commissioner-General may

(11)The Commissioner-General may reduce or annual any penalty imposed on any person under paragraph (a) of subsection (10) if such person proves to the satisfaction of the Commissioner-General that his failure to comply with the provisions of subsection (1) or the direction under subsection (2) as the case may be was due to circumstances beyond his control and that he has subsequently complied with such provisions or directions.

(12)Except where the Commissioner-General imposes a penalty under subsection (10) every person who contravenes the provisions of subsection (1) or subsection (2), shall be guilty of an offence under this Act and shall be liable on conviction after summary trial before a Magistrate to a fine not exceeding fifty thousand rupees or to an imprisonment of either description for a term not exceeding six months or to both such fine and imprisonment

(1)A Registered person shall, in respect of any taxable supply made by him, account for and pay the tax by reference to such taxable period at such time and in such manner as may be specified in this Act.

Provided however the amount of tax, due on the supply of any garments within such percentage as is permitted for sale locally by the Board of Investment of Sri Lanka, under any agreement entered into by a manufacturer of garments for export under section 17 of the Board of Investment of Sri Lanka Law No. 4 of 1978 or by any other garment manufacturer who manufactures garments for export under the supervision of the Department of Customs shall be twenty five rupees for each such garment supplied within Sri Lanka

Provided further that no other tax or levy including any duty under the Customs Ordinance shall be charged or collected on such sale of garments, where the amount specified in the preceding proviso has been paid on such sale.

(2) Subject to the provisions of this Act, a registered person shall be entitled at end of each such period to credit for so much of his input tax as is allowable under this Act, and then to deduct such amount from any output tax that is due form him :

Provided however, any person adopting a payment basis of accounting, shall be entitled lo claim credit on so much of his input lax as is allowable under this Act, only in respect of a supply for which the payment, of the tax has been made by such person.

(3)Where a supply of goods or services received by a registered person, or goods imported by such person are used or are to be used partly (or the purposes of a taxable activity carried on or carried out by such person on which tax can be levied other than any tax levied under Chapter IIIA of the Act and partly for other purposes, the tax on such supplies and importation shall be apportioned so however that only so much of the lax on such supplies or importation as is referable to his taxable activity on which tax can be levied other than any tax levied under Chapter IIIA of the Act shall be counted as his input tax.

Provided however, in the case of a person providing leasing facilities under the Finance Leasing Act, No. 56 of 2000. the input lax on goods supplied under a finance leasing agreement entered into on or after July 1, 2003 but prior to January 1, 2004 shall be counted at the rate of ten per centum or less, even if the tax charged on such goods is more than ten per centum :

Provided further, that any person who accounts for the out put tax on all or part of his taxable supplies at the rate of ten per centum shall be entitled to deduct as input tax in relation to such supplies as is allowable under this Act only at the rate of ten per centum even where such person has paid the input tax at a higher rate than the rate of ten per centum on the value of such supplies received by him, other than in the case of a lorry, motor coach or wagon.

Provided further, that any person who accounts for the output tax at the rate of five per centum shall not be entitled to deduct any input tax in relation to such supply other than in the case of a motor vehicle used for purposes of transportation of machinery for production :

Provided further, any input tax paid on 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.

For the purpose of this subsection “

“lorry” and “motor coach” shall have the respective meanings as assigned to them in the Motor Traffic Act (Chapter 203); and

“wagon” shall have the same meaning as assigned to it in the Finance Act No. 16 of 1995.”.

(4) Where an unregistered person leases out his land and buildings in terms of a tenancy agreement to a registered person, such registered person shall, notwithstanding that the unregistered person is not entitled to claim any input tax in respect of any expenses incurred in connection with the services provided on such land and buildings by another registered person, be entitled to claim such amount of input tax as determined by the Commissioner-General for the expenses incurred by him on such services provided on such land and buildings for the duration of such tenancy agreement if such registered person provides sufficient evidence to the satisfaction of the Commissioner-General to enable him to determine the amount of such input tax which such registered person is entitled to claim.

Provided that where any residue of any excess input tax refundable on or after August I, 2002 under the Goods and .Services Act, No, 34 of 1996 is outstanding on August 1. 2002. such excess shall not be deducted from any output tax due for any taxable period under this Act, but shall accordingly be refunded under the Goods and Services Tax, Act. No. 34 of 1996.

(5) Where any return is furnished under subsection (1) or (2) of section 21 and if at the end of the taxable period to which such return relates the amount of the input tax allowable under this Act exceeds the amount of the output tax, the excess of the input tax shall not be refunded but shall be set off against the output tax of the succeeding taxable period and so on. Any residue of such excess as has not been so set off in the period of six months from the end of the taxable period in which such excess first arose, shall, subject to the provisions of subsection (3) of section 58, be refunded; and where it is not so refunded the Commissioner-General shall pay interest, at such rate prescribed under section 59 on such amount for the period commencing on the expiration of one month from the end of the taxable period in which such refund became due and ending on the date of the refund subject to the provisions of the proviso to section 59 :

Provided that where any residue of any excess input tax refundable on or after August 1,2002 under the Goods and Services Tax Act, No. 34 of 1996 is outstanding on August 1. 2002, such excess shall not be deducted from any output tax due for any taxable period under this Act, but shall accordingly be refunded under the Goods and Services Tax Act, No. 34 of 1996:

Provided however, that where in a taxable period

such part of the excess or such excess as the case may be including any excess brought forward from any taxable period under this Act or the Goods and Services tax. Act, No 34 of 1996 for any taxable period or part of a taxable period ending on or before July 31, 2002 shall be refunded, subject to the provisions of section 58 not latter than one month after the end of the taxable period or from the date of the receipt of the return for such taxable period, in which the excess arose whichever is latter.

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.

In the event of a failure to pay such refund within such period interest on such refund shall be payable from the date-on which the refund becomes due to the date of payment thereof at such rate as may be prescribed under section 59 subject to the provisions of the proviso to that section.

(6) Any input tax attributable to the supply of goods or services received shall not be deducted under subsection (2) in respect of the following —

Provided however, notwithstanding the provisions of subsection (3) and paragraph (ii) of subsection (5) any registered person who has obtained a licence under the Electricity Act, (Chapter 205) and engages in the distribution of electricity may be allowed input tax on the purchase of electricity for such distribution notwithstanding the exemption under items (xxvi) of the Schedule to the Goods and Services Tax Act. No. 34 of 1996 or under item (xviii) of the First Schedule to this Act.

Provided further, where input tax disallowed in respect of any motor vehicle referred to in paragraph (i) may be allowed up to a limit of fifty percent of such input tax for any taxable period commencing on or after January 1, 2003, subject to the provisions of subsection (3), where such vehicle is partly or wholly used in any taxable activity.

For the avoidance of doubt it is hereby declared that for the purpose of this subsection, where the return has not been furnished, the input tax shall be deemed not to have been deducted from the output tax.

(7) Where any person have proved to the satisfaction of the Commissioner-General that such person has commenced any business any project in Sri Lanka, and undertakes to make taxable supplies in respect of such business or project within a period of thirty months from commencement of such operation, then

Provided that any person, who is already registered for an existing business or project shall inform the Commissioner-General of such fact and request that such registration be extended to include any new business or project. The provisions of this subsection shall thereupon apply to such new business or project.

(8) Notwithstanding the provisions of section 33 any refund in excess of the amount due or any excess amount of input tax claimed under this Act or the Goods or Service tax Act No. 34 of 1996 shall be assessed by an Assessor to the registered person to whom the refund has been made on making such claim as the case may be and such amount shall be deemed to be a tax in default on the first day of the taxable period in which the excess of input tax first arose resulting in such refund or claim in excess as the case may be.

For the purpose of this subsection, input tax claimed in a return by any person

shall be deemed to be an excess amount of input tax claimed by such person

(9) Notwithstanding the provisions of the first proviso and second proviso to subsection (3), any registered person who, for any taxable period commencing from January 1,2004, makes a taxable supply, other than any zero rated supply or a supply which has continuously been taxed at the rate of ten per centum, shall be entitled to deduct as input tax seventy five per centum of such input tax paid at the rate of twenty per centum on the value of such supplies received by him :

Provided that where the input tax is related to a taxable period prior to January 1. 2004, any registered person who has made any taxable supply which was liable to tax at the rate of twenty per centum, shall not be subject to the above limitation.

(1) Where a registered person, has issued a tax invoice and accounted for an incorrect amount of tax by undercharging or overcharging tax on a supply made to another person, he shall be entitled to issue to such other person a tax debit note or a tax credit note, as the case may be. for the purpose of adjusting the amount of tax so undercharged or overcharged.

(2) Upon the issue of the tax debit note or tax credit note as the case may be, in respect of a supply and in relation to the period in which such note was issued

(3)The tax debit note or tax credit note referred to in subsection (1) shall be in the specified form

(1) Notwithstanding the provisions of Chapter I, II. III and item (xi) of the First Schedule to this Act, a Value Added Tax (hereinafter in this Chapter referred to as “the tax”) shall be charged in accordance with the provisions of this Chapter on the supply of financial services in Sri Lanka

(i) by any specified institution during the period commencing January 1,2003 and ending on June 30, 2003; and

(ii) by any person on or after July 1. 2003,

where such specified institution or person carries on the business of supplying such financial services.

(2) Every specified institution. carrying on the business of supplying any financial service in Sri Lanka, shall be required to be registered where the value of such supply for a period of three months exceeds five hundred thousand rupees or for a period of twelve months one million eight hundred thousand rupees, as the case may be.

(3) Every specified institution, required to be registered under subsection (2), shall make an application for registration in the specified form to the Commissioner-General not later than ten days from the date of commencement of this Act:

Provided however any institution registered under this Act and which is a specified institution within the meaning of this Chapter, shall be deemed for all purposes to be a registered specified institution.

(4) The Commissioner-General shall upon such registration issue, to such registered specified institution

Provided however any institution deemed to be registered under this Chapter, shall not be issued with a tax registration number and a certificate of registration, under this Chapter.

(1) Every registered specified institution under this Chapter shall be liable to tax for each taxable period on its total value addition of such institution which includes the net profits or loss, as the case may be, before payment of income tax on such profit computed in accordance with accepted accounting standards, subject to an adjustment for economic depreciation, determined by the Minister having regard to the interest of economy by order published in the Gazette, and the emoluments payable to all the employees of such institution:

Provided however where the amount of profits for each taxable period cannot be accurately ascertained, such amount may be estimated on the basis of available information. The estimated amounts shall be adjusted to reflect the actual amount on half yearly basis.

Emoluments paid to all the employees shall include-

“For the avoidance of doubt it is hereby declared that “economic depreciation” referred to in this subsection, shall not apply in relation to any assets of any person registered under the Finance Leasing Act, No. 56 of 2000, being an asset which forms part of the leasing stocks of such person.”;

(2), Every registered specified institution shall maintain a pay sheet in respect every employee, other than a specified employee, in the’ manner set out by the Commissioner-General under section 110 of the Inland Revenue Act, No. 38 of 2000.

(3) The amount of tax payable for each month ‘shall be ten per centum of the value additions specified in subsection (1).

(4) Notwithstanding anything contained in subsection (1) any person to whom this Chapter applies, may in writing communicate to the Commissioner-General, his intention to calculate subject to the provisions of subsection (5), the tax to which he is liable in respect of any month commencing on or after July 1. 2003. The provisions of subsection (5) shall however be applicable for the period subsequent to the communication in writing to the Commissioner -General which communication shall not be revocable.

(5) For the purpose of calculating the tax, the value addition attributable to”

shall be treated as zero.

(6) Notwithstanding the provisions of subsection (2) of Section 25A, no tax shall be charged from any person liable to such tax, if the value addition calculated in accordance with the provisions of this section does not in respect of any calendar month exceed seventy five thousand rupees.

(7) For the purposes of this section “group of companies” means a parent company and all its subsidiaries where the parent company which has one or more subsidiaries, and such subsidiaries are controlled by the parent company either by controlling the composition of the board of directors of such subsidiary or by holding more than half in nominal value of the equity share capital of such subsidiary.

(8) Notwithstanding the provisions of subsection (3) the amount of tax payable for each month commencing on or after January 1, 2004 but ending on or before December 31, 2005 shall be fifteen percentum and for each month commencing on or after January 1, 2006 shall be twenty percentum of the value addition specified in subsection (1).

(i) for any taxable period commencing on or after January 1, 2003 and ending prior to January 1, 2004,”

under any other provision of this Act. other than this Chapter, in relation to tax calculated as provided in section 22, shall be deducted against the tax payable under this Chapter; and

(ii) for any taxable period commencing on or after January 1, 2004, the tax calculated and paid to the Commissioner-General after deducting credit for input tax by any person subject to a limitation of twenty five per centum of any such tax, in respect of the supply of leasing facilities by any person registered under the Finance Leasing Act, No. 56 of 2000, under any other provision this Act, other than this Chapter, in relation to tax calculated as provided in section 22, shall be deducted against the tax payable under this Chapter.

Provided further, the preceding provisions of this section shall not apply to a registered person where the tax payable by such person under this Chapter, is calculated subject to the provisions of subsection (5) of section 25c.

(a) the operation of any current, deposit or savings account;

(b) the exchange of currency;

(c) the issue, payment. collection or transfer of ownership of any note, order for payment, cheque or letter of credit;

(d) the issue, allotment, transfer of ownership, drawing, acceptance or endorsement of any debt. security, being’ any interest in or right to be paid money owing by any person other than the transfer of non- performing loans of a licensed Commercial Bank to any other person in terms of a re-structuring scheme of such bank as approved by the Central Bank of Sri Lanka with the concurrence of the Minister;

(e) the issue, allotment, transfer of ownership of any equity security or a participatory security;

“(f) issue, underwriting, sub-underwriting or subscribing of any equity security, debt security or participatory security.”.

(g) the provision of any loan, advance or credit;

(h) the provision –

specified institution means –

“(1) The tax in respect of any taxable period shall be paid not later than the twentieth day of the month following the end of the taxable period:

Provided that, in a case of a person whose taxable period falls in the definition referred to in paragraph (b) of the definition of the expression taxable period referred to in section 83, the tax in respect of any quarter commencing on or after January 1, 2006 shall be paid, subject to the making of any final adjustments, if any, with the submission of the return, in the following manner:-

Any tax not paid as set out above shall be deemed to be in default and the person by whom such tax is payable or where any tax is payable by more than one person, each such person shall be deemed to be a defaulter for the purposes of this Act.”.

(2)The Commissioner-General may differ the due date for the payment of any tax assessed under paragraph (a) or (b) of subsection (1) of 28 or subsection (1) of section 31, under an appeal against such assessment where-

Provided however such deferred tax or part thereof shall become payable on the settlement of the appeal or withdrawal of the deferment by the Commissioner-General and shall be deemed to be tax in default from the original due date of such tax.

(1) Where any tax is in default the defaulter shall in addition to such tax in default pay as penalty-

Provided however that the total amount payable as penalty under this subsection shall in no case exceed one hundred per centum of the tax in default and any such amount may be waived or reduced if the Commissioner-General is satisfied that by reason of any special circumstances in which the default occurred waiver or reduction of such amount would be just and equitable

(2) Where upon the final determination of an appeal under Chapter VI any tax in default to which any sum or sums under subsection (I) has or have been added is reduced, then such sum or sums shall be calculated on the tax so reduced.

(3) Where any penalty payable under this section is outstanding on November 6,2002

(1) Where-

the Assessor shall assess the amount of the tax, which such person, in the judgment of the Assessor, ought to have paid for that taxable period and shall, by notice in writing, require such person to pay such amount forthwith The amount so assessed in respect of any person for a taxable period shall be deemed to be the amount of the tax payable by him for that taxable period.

(a)that a registered person has made a taxable supply for a value less than the open market value of such supply or for no value ; or

(b)the transaction in respect of which taxable supply has been made is between two associated persons,

(1)Where it appears to an Assessor that a person chargeable with tax has for any taxable period paid as tax on amount less than the proper amount of the tax payable by the him for that taxable period, the Assessor may, at any time, assess such person at the additional amount at which, according to the judgment of such Assessor, tax ought to have been paid by such person. The Assessor shall give such person notice of the assessment.

(2)Where an assessment is made under subsection(1)in respect of any person for any taxable period, the amount so assessed shall be deemed to be tax in default for that taxable period and accordingly such person ought to have paid the tax for that taxable period be liable to the penalty in respect of such amount.

(1)Where any registered person has furnished a return under subsection (1 ) of section 21 in respect of a taxable period or has been assessed for tax in respect of any period, it shall not be lawful for the Assessor where an assessment-

(2) Notwithstanding the provisions of subsection (1) where the Assessor is of opinion that a person has wilfully or fraudulently failed to make a full and true disclosure of all the material facts necessary to determine the amount of tax payable by him for any taxable period, it shall be lawful for the Assessor where an assessment –

within a period of five years from the end of the taxable period to which the assessment relates. For the purposes of this Chapter any notice of assessment may refer to one or more taxable periods.

(1) Any registered person may if he is dissatisfied with any assessment or additional assessment made in respect of him by an Assessor, or a penalty imposed under this Act, appeal against such assessment, additional assessment or penalty, as the case may be, to the Commissioner-General within thirty days after the service of notice of such assessment, additional assessment or imposition of penalty, as the case may be Such person shall, notwithstanding the appeal, but subject to subsection (2) or section 26, pay the tax charged by such assessment or additional assessment together with any penalty imposed on him by his Act:

Provided that, the Commissioner General, upon being satisfied owing to absence form Sri Lanka sickness or other reasonable cause, the appellant was prevented from appealing within such period shall grant an extension of time for preferring the appeal

(2)Every appeal shall be preferred by a petition in writing addressed to the Commissioner General and shall state precisely the grounds of such appeal

(3) Where the assessment or additional assessment appealed against has been made in the absence- of a return the petition of appeal shall be accompanied by a return with the proof of payment of the tax and penalty due on such return

(4)Every person preferring an appeal under subsection ( 1) against an assessment for any taxable period shall (unless such person has done so already), pay to the Commissioner General the amount of the tax payable by such person on the basis of the return furnished by him for such period together with any penal by thereon accrued up to the date of such notice of assessment and shall attach to the petition of appeal a receipt in proof of such payment:

Provided that the Commissioner-General upon being satisfied that owing to serious financial hardship suffered by the appellant at or about the time of such notice of assessment or owing to reasonable cause the appellant was prevented from paying such tax and such penalty may grant an extension of time for the payment of such tax and penalty thereon accrued up to the date of payment and the receipt furnished within such extended time shall for the purposes of this subsection be deemed to have been attached to the petition of appeal

(5)Every petition of appeal which was not made within the period specified under subsection (I) or does not conform to the provisions of subsections (2) (3) and (4) shall not be valid

(6) On receipt of a valid petition of appeal the Commissioner-General may cause further inquiry to be made by an Assessor, other than the Assessor who made such assessment against which the appeal in preferred and if in the course of such inquiry an agreement is reached as to the matters specified in the petition of appeal the necessary adjustment of the assessment shall be made

(7)Where no agreement is reached between the appelant and the assessor in the manner provided in subsection (6), the Commissioner -General shall fix a time and place for the hearing of the appeal.

(8)Every appelant shall attend before the Commissioner-General at time and place fixed for the hearing of the appeal. The appelant may attend the hearing of the appeal in person or by an authorized representative. The Commissioner-General may,if he thinks fit, from time to time adjourn the hearing of an appeal for such time and place as he shall fix for the purpose.In any case in which an authorized representative attends on behalf of the appellant, the Commissioner-General may adjourn the hearing of the appeal and may, if he considers that, the personal attendance of the appelant is necessary for the determination of appeal, require that the appelant shall attend in person at the time and place fixed for the adjourned hearing of the appeal. if the appelant or his authorised representative fails to attend at the time and place fixed for the hearing or any adjourned hearing of the appeal or if the appelant fails to attend in person when required so to attend by the Commissioner-General, the Commissioner-General shall dismiss the appeal.

Provided that, if the appellant shall within a reasonable time after the dismissal of an appeal satisfy the Commissioner-General that he or his authorized representative was prevented from due attendance at the hearing or at any adjourned hearing of such appeal by season of absence from Sri Lanka, sickness, or other reasonable cause, the Commissioner-General may vacate the order of dismissal and fix a time and place for the hearing of the appeal:

Provided further that every petition of appeal under this Chapter shall be agreed to or determined by the Commissioner General within two years from the date on which such petition of appeal is received by the Commissioner-General unless the agreement or determination of such appeal depends on the furnishing of any document or the taking of any action by any person other than the appellant or the Commissioner General or an Assessor Where such appeal is not agreed to or determined within such period the appeal shall he deemed to have been allowed and the tax charged accordingly The receipt of every appeal shall be acknowledged (within thirty days of its receipt and where so acknowledged, the date of the letter of acknowledgement shall for the purposes of this section be deemed to be the date of receipt of such appeal). Where however the receipt of any appeal is not so acknowledged, such appeal shall be deemed to have been received by the Commissioner-General on the day on which it is delivered to the Commissioner-General.

For the purposes of this proviso where an extension of time has been granted to an appellant for the payment of tax under subsection (4) the date of the receipt in proof of the payment of tax shall be deemed to be the date of receipt of such Appeal

(9) The Commissioner General shall have power to summon ,any person whom he may consider able to give evidence in respect of the appeal, to attend before him and examine such person on oath or otherwise Any person so attending may be allowed by the commissioner- General any reasonable expenses necessarily incurred by such person in so attending

(10)Before making his determination on any appeal the Commisssoner-General may if he considers it necessary so to do, by notice given in writing to any person require that person to produce for examination, or to transmit to the Commissioner-General within the period specified in such notice, and such deeds, plans, instruments, books of accounts, trade lists, stock lists registers, cheques, paying in slips auditors reports or other documents in his possession as may be specified in such notice. Further the Commissioner-General may obtain the assistance of any other Commissioner, Deputy Commissioner or an Assessor who is familiar with the issues involved in such hearing of an appeal

(11)Where the Commissioner-General hears the evidence of the appellant or of any other person in respect of the appeal, he shall maintain or cause to be maintained a record of such evidence.

(12) In determining an appeal under this section time Commissioner-General may confirm, reduce, increase or annual the assessment appealed against and shall give notice in writing to the appellant of his determination on the appeal

(13) The Commissioner General, may at any time prior to the determination of an appeal cancel the deferment of the due date for payment under subsection (2) or section 26, if he is satisfied that the appellant has not taken adequate steps to settle the appeal and inform the appellant in writing or such cancellation

(1)Any person aggrieved by the determination of the Commissioner-General upon an appeal made to him under subsection (1) of section 14 may appeal from such determination to the Board of Review constituted under the Inland Revenue Act, No 18 of 2000 and provisions of that Act relating to appeals to such Board shall, mutatis mutandis, apply to, and appeal under this section.

(2) Notwithstanding anything to the contrary in any other law, an appeal to the Board of Review under subsection (1) shall be determined by the Board within a period of two years from the date or commencement of the hearing of such appeal by the Board.

(1)The decision of the Board of Review shall be final :

Provided that either the appellant or the Commissioner-General may make an application requiring the Board of Review to state a case on a question of law for the opinion of the Court of Appeal

(2) The provisions of the Inland Revenue Act, No 18 of 2000 relating to appeals to the Court of Appeal and to the Supreme Court shall, mutatis mutandis, apply to an application and reference under this section

(i) such charge shall not extend to or affect any assets sold by such person to a bonafide purchaser for value prior to the seizure of the same in accordance with the provisions of section 42 ;

(ii) as regards immovable property the tax shall not rank in priority to any lease or encumbrance created bona fide for value and registered prior to the date of the seizure ;

(iii) as regards movable property, where the tax for more than lour taxable periods is in default, the tax for four taxable periods only to be selected by the Commissioner-General, shall rank in priority to any lien or encumbrance created bonafide for value prior to the dale of default of such tax.

(1) Where any tax is in default, the Commissioner-General shall, before proceeding to recover such tax, issue notice in writing to the defaulter stating –

(2)Where an assessment has been made and the defaulter has not appealed with in the specified time against the assessment in respect of which such tax is charged, he may within thirty days of date of such notice make any objection to the tax so charged to the Commissioner-General and the Commissioner-General shall notwithstanding the provisions of section 37 consider such objections and give his decision thereon which shall be final.

(1)The Commissioner- General may appoint persons to be tax collectors the purposes of this Act

(2) Where any tax is in default the Commissioner General may issue a certificate to a Divisional Secretary, Assistant Divisional Secretary, Fiscal, Deputy Fiscal or Tax Collector containing particulars of such tax and the name and address of the defaulter and the officer to whom such certificate is issued shall be empowered and is hereby required to cause the tax to be recovered from the defaulter named in the certificate by seizure and sale of his movable property.

(3) the seizor referred to in subsection (2) shall be effected in such manner as the said officer shall deem most expedient in that behalf and any property so seized shall be kept for seven days at the costs and charges of the defaulter. if the defaulter fails to pay the said tax in default together with the costs and charges within the said seven days the Divisional Secretary, Assistant Divisional Secretary, Fiscal, Deputy Fiscal or Tax Collector as the case may be shall cause such property to be sold by public auction

(4)The sum realized by sale shall be applied –

and any balance shall be paid to the owner of the property seized.

(5) It shall be lawful for a Tax Collector to recover from the defaulter reasonable expenses incurred by him in proceeding against the defaulter under this section notwithstanding that the seizor was not effected. where cash is seized such reasonable expenses shall be set off first from the amount so seized. Any amount so recovered or set off shall be informed to the defaulter in writing.

(6) Where any tax is in default and the Commissioner-General is of opinion that the recovery by the means provided in subsection (2) is impracticable or in expedient he may issue a certificate to a District Court having jurisdiction in any district where, the defaulter resides or in which any property movable or immovable owned by the defaulter situate containing such particulars of tax and the name and address of the person or person by whom, the tax is payable and the Court shall thereupon direct a writ of execution to issue to the Fiscal authorizing and requiring him to seize and sell all or any of the property movable and immovable of the defaulter of such part thereof as he may deem necessary lot recovery of the tax and the provisions of sections 226 to 297 of the Civil Procedure Code shall mutandis ,mutatis apply to such seizure and sale.

For the purpose of this section “movable property” shall include plant and machinery whether fixed to a building or not.

(1) Where the Commissioner-General is of opinion in any case that recovery of tax in default by seizure and sale is impracticable, or inexpedient or where the full amount of the tax in default has not been recovered, he may issue a certificate containing particulars of such tax and the name and last known place of business or residence of the defaulter, to a Magistrate having jurisdiction in the division in which such place of business or residence of the defaulter is situate. The Magistrate shall thereupon summon such defaulter before him to show cause why further proceedings for the recovery of the tax should not be taken against him, and in default or sufficient cause being shown, the tax in default shall be deemed to he a fine imposed by a sentence of, the Magistrate on such defaulter for an offence punishable with fine only or not punishable with imprisonment and the provisions of subsection (1) of section 291 (except paragraphs (a), (d)and (i) therefore of the Code of Criminal Procedure No 15 of 1979, relating to default of payment of a fine imposed for such an offence shall thereupon apply, and the Magistrate may make any direction which, by the provisions of that subsection, he could have made at the time of imposing such sentence:

Provided that nothing in this section shall authorize or require the Magistrate in any proceeding thereunder to consider, examine or decide the correctness of any statement in the certificate of the Commissioner- General.

(2)Nothing in subsections (2) to (5) of section 291 of the Code of Criminal Procedure Act, No. 15 of 1979, shall apply in any case refered to in subsection (1).

(3)In any case referred to in subsection (I) in which the defaulter is sentenced to imprisonment in default of payment of the fine deemed by that section to have been imposed on him, the Magistrate may allow time for the payment of the amount or the said fine or direct payment of that amount to be made in installments

(4)The court may be required bail to be given as a condition precedent to allowing time under subsection (1) for showing cause as therein provided or under subsection (3) for the payment of the fine; and the provisions of Chapter XXXIV of the Code of Criminal Procedure Act. No. 15 of 1979 shall apply where the defaulter is so required to be given bail.

(5)Where payment in installments is directed under subsection (3) and default is made in the payment of any one installment, the same proceedings may be taken as if default had been made in payment of all the installments then remaining unpaid.

(1) Where the tax payable by any person is in default and it appears to the Commissioner-General to be probable that any person-

the Commissioner-General may give to such person notice in writing (a copy of which shall be sent by post to the defaulter) requiring him to pay any such moneys not exceeding the amount of the tax in default to the officer named in such notice. The notice shall apply to all such moneys which are in his hands or due from him at the date of receipt of such notice or come into his hands or become due from him or area about to be paid by him at any time within a period of three months after the date of such notice

(2)Any person who has made any payment in pursuance of this section shall be deemed to have acted under the authority of the defaulter and of all the persons concerned and is hereby indemnified in respect of such payment against all proceedings, civil or criminal notwithstanding the provisions of any written law contract or agreement.

(3)Where any person to whom a notice has been given under subsection (1) is unable to comply herewith owing to the fact that moneys in question do not come into his hands or custody or become due from him during the period reffered to in subsection(1) he shall within fourteen days of the expiration thereof give notice in writing to the Commissioner General apprising him of the facts-

(4) where any person to whom a notice has been given under subsection (1) is unable to comply herewith and has failed to give notice to the Commissioner-general as provided in subsection (3) or where such persons are deducted or could have deducted the tax to which the notice relates or any part thereof and has not paid over as required by the Commissioner-General the amount of such tax or part thereof within fourteen days after the expiration of the period reffered to in subsection (1), such person shall, if he is an individual, be liable or where such person is a company or body of persons, whether corporate or incorporate, the secretary, manager, or the principal officer of such company or body be personally liable, for the whole of the tax which such person has been required to deduct, and such tax may be recovered from such individual, secretary, manager or other principal officer, as the case may be, by all means provided in this act.

(5) For the purpose of this section the expression “defaulter” shall be deemed to include the agent of a person who is in default and the provisions of this section shall apply in any case where the tax which would have been payable by any person if he were alive is in default, and for the purpose of the application of these provisions in any such case the expression “defaulter” in subsection (1) means

(1)Where the Commissioner-General is on opinion that any person is about to or likely to leave Sri Lanka without paying the tax due from him, the Commissioner-General may issue a certificate containing particulars of such tax and the name of such person to a Magistrate, who shall on receipt thereof issue a direction to the Inspector-General of Police to take such measures as may be necessary to prevent such person from leaving Sri Lanka without paying the tax or furnishing security to the satisfaction of the Commissioner-General for payment thereof.

(2)At the time of issue of certificate to the magistrate the Commissioner-general shall issue to such person a notification thereof by personal service, or registered letter sent through the post and telegraph; but the non receipt of any such notification by such person shall not invalidate proceedings under this section.

(3) The production of a certificate signed by the Commissioner-general stating that the tax has been paid or that security has been furnished for the payment of the tax or payment of the tax to a police officer in charge of a police station shall be sufficient authority for allowing such person to leave Sri Lanka

(4) Any police officer to whom the amount of any tax specified in such certificate had been paid shall forthwith pay such amount to the Commissioner-General.

(1) Where a body corporate has not paid any tax on or before the due date, as provided in Chapter IV it shall be lawful to proceed under all or any of the provisions of this Chapter against a manager, director, secretary or any other principal officer of such body corporate, as if such officer is responsible for such default unless he proves the contrary to the satisfaction of Commissioner-General notwithstanding anything in any other written law relating to such body corporate.

(2) Where an unincorporate body of persons has not paid any tax on or before the due date, as provided in Chapter IV, it shall be lawful to proceed under all or any of the provisions of this Chapter against any partner or office-bearer of such unincorporate body of persons as it he is responsible for such default unless he proves the contrary to the satisfaction of the Commissioner-General, notwithstanding anything in any other written law.

(1) The Commissioner-General may, by writing under his hand, delegate to any Assessor any of the powers and functions conferred on or assigned to the Commissioner-General by this Chapter

(2) Every Assessor to whom any power or function has been delegated under subsection (i) shall exercise or discharge such power or function subject to the general or special directions of the Commissioner-General.

(1)The secretary, manager, director or other principal officer of every company or body of persons shall be liable to do all such acts, matters or things as are required to be done under the provisions of this Act by such company or body of persons :

Provided that any person to whom a notice has been given under the provisions of this Act on behalf of a company or body of persons shall be deemed to be principal officer thereof unless he proves that he has no connection with such company or body of persons or that some other person resident in Sri Lanka is the principal, officer thereof.

(2)Where an offence under this Act is committed by a company or body of persons, every person who at the time of the commission of the offence was the secretary, manager, director or other principal officer of the company or body of persons shall be deemed to be guilty of that offence unless he proves that the offence was committed without his knowledge and that he exercised all such diligence to prevent the commission of that offence as he ought to have exercised having regard to the nature of his functions in such capacity.

(1) Subject as hereinafter provided, where during the course of a taxable period a person chargeble with tax ceases to carry on or carry out any taxable activity in respect of which he is chargeable with such tax, he shall, not withstanding that he has ceased to carry on or carry out such taxable activity, be reliable to pay such tax for the period during which he carried on or carried out that taxable activity in that taxable period.

(2) Where any person is carrying on or carrying out a taxable activity transfers the assets of such taxable activity to another person as a going concern resulting in a change of ownership of any trade or businesses, tax payable in respect of such taxable activity for any period prior to the transfer may, if it cannot recovered from the transferor, be recovered from the transferee notwithstanding that an assessment may not have been made on the transferee and provisions of this Act as to collection and recovery of tax shall apply accordingly.

(1)Where any person chargeable with the tax dies, the executor of such deceased person shall, in respect of all taxable periods prior to the date of death of such person, be chargeable with tax which such person would be chargeable if he were alive, and shall be liable to do all acts, matters and things which such person if he were alive, would be liable to do under this Act :

Provided that-

(2) Where an executor on behalf of the estate of a deceased person carries on any taxable activity which is a part of such estate such executor shall, in respect of such taxable activity, be chargeable with the tax with which such person would be chargeable if he were alive

(1)Notwithstanding anything in the Companies Act. No. 17 of 1982, where a company is wound up and where any tax to which that any company is liable cannot be recovered, then, every person who was a director of the company at any, time during the period in respect of ‘which such tax is payable shall be jointly and severally liable for the payment of such tax unless he proves that the default in payment of tax cannot be attributed to any gross neglect, malfeasance or breach of duty on his part in relation to affairs of the company, and the provisions of this Act as to collection and recovery of tax shall apply accordingly.

(2) Where a body of persons is dissolved and any tax to which such body of persons is liable, cannot be recovered then every person who was a partner or office-bearer of such body of persons at any time during the period in respect of which such tax is payable shall be jointly and severally liable for the payment of such tax unless he proves that the default in payment of due tax cannot be attributed to any gross neglect, malfeasance or breach of duty on his part in relation to the affairs of such unincorporate body and the provisions of this Act relating to collection and recovery of tax such apply accordingly,

(1) Where a registered person makes an application for a refund of any tax or any penalty paid by him in excess during a taxable period, within three years from the end of such taxable period and satisfies the Commissioner-General that such person has paid any tax or any penalty in excess, of any amount which he was liable to pay for that period, such person shall be entitled to a refund of the amount paid in excess, subject lo the provisions of subsection (3) :

Provided however, that any such amount paid in excess by a registered person referred to
in paragraphs (a), (b), (c), (d) or (e) of subsection (5) of section 22, shall be refunded to such person within forty- five days from the end of the taxable period or from the date of the receipt of the return for the taxable period in which the excess arose, whichever is later:

Provided further, that any such amount paid in excess by a registered person referred to in paragraphs (c), (d) or (e) of subsection (5) of section 22 shall be refunded to such person within fifteen days if such amount of the refund is subject to a furnishing of a bank guarantee or for an insurance bond which is valid for a period of three months from the end of the taxable period, or from the date of the receipt of the return for the taxable period in which the excess arose, whichever is later.

(2) Where through death, incapacity, bankruptcy, liquidation or other cause a registered person who would but for such cause have been entitled to make a claim under subsection (i) is unable to do so. his executor, trustee or receiver as the case may be, shall entitled to a refund of any tax or penalty paid in excess within the meaning of subsection (1) by such person for the benefit of such person or his estate.

(3) Notwithstanding anything in subsection (1)where any registered person-

(1) A person who being a tourist has proved to the satisfaction of the Secretary to the Ministry in charge of the subject of Finance or any person authorised by him in that behalf by a claim made in writing in then specified from,-

shall, if such tourist produces the relevant goods to the authorized person for inspection at point of departure and if such goods are being removed from Sri Lanka within two months from the date of purchase of such goods, the Secretary or the person authorised as the case may be, may on being satisfied of such facts, refund or make necessary arrangements to refund to such tourist, in foreign currency, such amount of the tax paid as exceeds the equivalent to US Dollars One Hundred in rupee value, at the time of such removal of goods from Sri Lanka.

(2) Any retailer who is a registered person under this Act shall apply to the Secretary to the Ministry or any person authorized by him in that behalf, for the purpose of registration under this section and such registered retailer shall be deemed to be an authorized retailer.

(3) Any authorized retailer who violates any condition subject to which his registration is issued, shall be guilty of an offence and shall on conviction after summary trial before a Magistrate be liable to a fine not exceeding rupees one hundred thousand and to the cancellation of his registration.

(4) Notwithstanding the provisions of subsection (1) of section 20, a tax invoice shall be issued by any authorized retailer, at the time of such supply by such authorized retailer to any tourist who has purchased such specified goods only in relation to such specified goods.

(5) Notwithstanding any other provisions to the contrary in this Act, every authorized retailer shall be allocated with monthly taxable periods by the Commissioner-General and such authorized retailer shall furnish monthly returns accordingly.

(6) For the purposes of this section –

“tourist” means any individual who is not a citizen of Sri Lanka and who is not employed in Sri Lanka, or who has not lived in Sri Lanka for three hundred and sixty five days or more in the last two years prior to the date of his arrival in Sri Lanka;

“specified goods” shall be such goods as are specified by Order published in the Gazette.

(1) Where any amount refundable under this Act to a registered person has not been refunded within a period of thirty days from the due date of such refund there shall be paid by the Commissioner-General to such person interest on such amount for the period commencing on the thirtieth day from the due date up to the date of refund of the amount as is required to be refunded by the Commissioner-General to such person under this Act, at the rate prescribed by the Minister from time to time:

Provided however, no such interest shall be payable where there was a delay on the part of the registered person in complying with any requirement made by the Assessor in respect of any records of the registered person.

(2)for the purposes of this section” due date” means the period ending ninety days-

(1) Every notice to be given by the Commissioner General a Deputy Commissioner or an Assessor under this Act shall bear the name of the Commissioner General or Deputy Commissioner or Assessor as the case may be and every such notice shall be valid if the name of the Commissioner General, Deputy Commissioner or Assessor is duly printed or signed thereon.

(2) Every notice given by virtue of this Act may be served on a person either personally or by being delivered at or sent by post to his last known place of abode or any place at which he is, or during the period to which the notice relates, was carrying on or carrying out a taxable activity.

(3) Any notice sent by post shall be deemed to have been served on the day on which it could have been recieved in the ordinary course of post.

(4) In proving service by post it shall be sufficient to prove that the letter containing the notice was duly addressed and posted

(5) Every name printed or signed on any notice or signed on any certificate given or issued for the purposes of this Act, which purports to be the name the person authorised to give or issue the same, shall be judicially noticed.

(1) No notice, assessment, certificate or other proceeding purporting to be in accordance with the provisions of this Act shall be quashed, or deemed to be void or voidable, for want of form, or be effected by reason of a mistake, defect or ommission therein, if the same is in substance and effect in conformity with, or according to, the intent and meaning of this Act, and if the person assessed or intended to be assessed or affected thereby is designated therein according to common intent and understanding.

(2) Without prejudice to the generality of subsection (I) an assessment shall not be affected or impugned by reason of

if notice of such assessment is duly served on the person intended to be charged and contains in substance and effect the particulars setout in paragraph (a) of this subsection.

(1) Any officer of the Department of Inland Revenue who is specially authorised by the Commissioner-General in that behalf may accompanied by a peace officer to do all or any of the following Acts :-

and the provisions of the Code of Criminal Procedure Act, No. 15 of 1979, relating to searches shall apply so far as may be to searches under this section.

In this subsection “peace officer” shall have the same meaning as in the Code of Criminal Procedure Act. No. 15 of 1979.

(2)Before authorising any officer to exercise the powers under subsection (I), the Commissioner-General shall record the circumstances which necessitate the exercise of such powers by such officer.

(3)Where any officer authorised by the Commissioner- General under subsection (I) take into his possession any book of account, register, record or other document from any person, such officer shall issue to such person a memorandum specifying the book, register, record or other document he has taken into this possession.

(4)Any book of account, register, record or other document taken to his possession under subsection (I), by any officer may be retained in the possession of such officer as long as may be necessary for a scrutiny of such book, register, record or other document or for the institution of legal proceedings against the person to whom such book, register, record or other document belongs.

(1)The Commissioner-General or any other officer of the Department of Inland Revenue who is specially authorised in that behalf of the Commissioner General in writing may do all or any of the following acts

(2)where an officer authorised by the Commissioner-General under subsection (1), takes into his possession any book of account, register, record or other document from any person, such officer shall issue to that person a memorandum specifying the book, register, record or document he has taken into his possession.

(3) Any book of account, register, record or other document taken into his possession under subsection (1), by any officer may be retained in the possession of such officer for a period not exceeding three years from the date of taking such possessions for the purposes of scrutinizing such book, register, record, or document or for the institution of legal proceedings against the person to whom such book, registers, record or other document belongs :

Provided, however where the Commissioner-General has instituted action in the case of willfull ovation under sections 66 or 67 as the case may be, such book, register, record or document may be retained as long as it is required for the purposes of such prosecution.

(1) Every registered person shall keep and maintain records in respect of the taxable activity carried on or carried out by him to enable the Commissioner General or any other officer authorized by the Commisssoner General or that behalf to ascertain the liability for the payment of the tax.

(2)The form of the records to be maintained under subsection (i) and the particulars to be set forth therein shall be as prescribed

(3) for the purpose of this section “record” includes-

(a) being a person required to take an oath fails to take an oath of secrecy required under section 73 : or

(b) acts in contravention of the provisions of section 73 ; or

(c) aids, abets or incites any other person to act in contravention of any of the provisions of this Act.

(a) gives any false answer whether orally or in writing to any question or when requested to furnish information in accordance with the provisions of this Act, or under the Goods and Services Tax Act, No. 34 of 1996;

(b) omits from a return made under this Act any particulars which he should have included in such return ; or

(c) makes any false return or false entry in any return made under this Act

(i)a sum equal to twice the amount of tax so evaded or attempted to be evaded for which he is liable under this Act for the taxable period in respect of which the offence was committed ; and

(ii) a sum not exceeding twenty five thousand rupees or to imprisonment of either description for a term not exceeding six months or to both such fine and imprisonment.

(a)Fails to apply for registration as required under section 10 ; or

(aa) fails to apply for registration as required under section 25A; or

(b)fails to notify the Commissioner-Genera! of any matters required to be notified under section 19 ; or

(c)fails to issue a tax invoice as required under subsection (1) of section 20 or an invoice under subsection (6) of section 20 ; or

(d) issues more than one tax invoice for each taxable supply : or

(e) issues a tax invoice where such person is not, entitled to issue such tax invoice under section 20 ; or

(f) fails to furnish a return under section 21 or comply with a notice issued under section 21 ; or

(g) having appeared before an officer of the Department of Inland Revenue in compliance with a notice issued to him under section 21 or section 34 fails, without sufficient cause, to answer any question lawfully put to him by an officer acting under this Act ; or

(h) gives any incorrect information relating to any matter or thing affecting his own liability to tax or the liability of any other person : or

(i) permits the payment to any other person, other than the Commissioner-General of any amount to be paid under section 44 ; or

(j) willfully obstructs or delays the Commissioner-General or any other officers in the exercise of his power under section 62 or 63 ; or

(k) fails to maintain records as required under section 64 ;

(l) not being a person registered under this Act, issues a tax invoice.

(1) The Commissioner-General shall be in-charge of the administration of this Act, assisted by such number of Commissioners of Inland Revenue, Deputy Commissioners of Inland Revenue, Senior Assessors of Inland Revenue, Assessors of Inland Revenue and Tax Officers of Inland Revenue as may be necessary for the purpose of giving effect to the provisions of this Act.

(2)

(3) A Commissioner of Inland Revenue or a Deputy Commissioner of Inland Revenue or a Senior Assessor of Inland Revenue may exercise, perform or discharge any power, duty or function conferred or imposed on, or assigned to, an Assessor by any provisions of this Act.

(1) There shall be established a Fund called the Value Added Tax Refund Fund, ( hereinafter referred to as “the Fund”)

“(2) There shall be credited to the Fund –

(3)There shall be paid out of the Fund all refunds required to be paid in accordance with the provision of this Act or the Goods and Services Tax Act, No, 34 of 1996.

(4)

(1) Every person who has been appointed or is deemed to be appointed under this Act or who has been employed in carrying out or in assisting any person in carrying out the provisions of this Act, shall preserve, and assist in preserving secrecy with regard to all matters that may come to his knowledge in the performance of his duties under this Act, and shall not communicate any such matter to any person other than the person to whom such matter relates or his authorized representative or to the Minister or the Secretary to the Ministry of the Minister in-charge of the subject of Finance nether suffer nor permit any person to have access to any records in the possession, custody or control of the Commissioner -General.;

(2) Every person appointed or deemed to be employed under or employed in carrying out the provisions of this Act shall, before acting under this Act and the Minister and the Secretary to the Ministry of the Minister in-charge of the subject of Finance shall before acting under this Act, take and subscribe before a Justice of the Peace an oath of secrecy in the prescribed form:

Provided however, such oath taken under the Goods and Services Tax Act, No, 34 of 1996 shall be deemed for all purposes to have taken under this Act.

(3) No person appointed or deemed to be appointed under this Act or employed in carrying out or in assisting any person in carrying out the provisions of this Act shall be required to produce in any court any return, document or assessment to divulge or communicate to any Court any matter or thing coming to his notice in the performance of his duties under this Act, except as may be necessary for the purpose of carrying into effect the provisions of this Act or any other written law administered by the Commissioner-General.

(4) Notwithstanding anything contained in this section, any officer of the Department of Inland Revenue may communicate any matter which comes to his knowledge in the performance of his duties under this Act or under any other written law administered by the Commissioner-General to any other officer of that Department, if the communication of such matter is necessary for the performance of any duty under this Act or such other written law and the Commissioner-General may produce or cause to be produced in any court in any proceedings under this Act a copy of any particulars contained in any return or document furnished to him under this Act or under any other written law administered by him or which is otherwise in his possession, certified by him or on his behalf to be a correct copy of such particulars and such copy shall, notwithstanding anything in the Evidence Ordinance relating to the proof of documents, be admissible in evidence:

Provided that the Commissioner-General may produce or cause to be produced the original of any such return or document in any case where it is necessary to prove the handwriting or the signature or the person who wrote, made signed or furnished such return or document, but only for the purpose of such proof:

Provided, further that the Commissioner-General shall not in any case be compelled to produce in any court either the original of such document or return or copy of any particulars contained in such document or return.

(5) Notwithstanding anything contained in the preceding provisions of this section the Commissioner-General shall –

(6) Notwithstanding anything contained in the preceding provisions of this section, any officer of the Department of Inland Revenue shall at the request of the Land Reform Commission established under the Land Reform Law, No. 1 of 1972, disclose to such Commission such particulars relating to the affairs of any person that may come to his knowledge in the performance of his duties under this Act, as may be required by such Commission for the exercise of its powers and the discharge of its functions under that Law.”.

(7) Notwithstanding any thing contained in this section the Commissioner-General may permit the Auditor-General or any officer of the Department of the Auditor-General duly authorized by him in that behalf to have access to any books, records, returns or other documents as may be necessary for the performance of his official duties.

The Auditor-General or any officer authorised by him under this subsection shall for the purpose of subsection (2), be deemed to be a person employed in carrying out the provisions of this Act.

(8) Notwithstanding anything in the preceding provisions of this section the Commissioner-General or any person authorized in that behalf by the Commissioner-General may, from time to time, cause to be published in such manner as the Commissioner- General may consider expedient,-

(9) Where for the purposes of prosecuting any director, manager, or other officer or employee of an insurance business who has acted in a manner prejudicial to the interests of the holders of policies issued in respect of that business, the Attorney- General by written notice requires the Commissioner-General to furnish such information relating to the assets of such director, manager, other officer or employee as is in the possession of the Commissioner-General, the Commissioner-General shall, notwithstanding anything in the preceding provisions of this section, furnish such information to the Attorney-General.

(10) Notwithstanding anything contained in the preceding provisions of this section, where it appears to the Commissioner-General from any matter which comes to his knowledge in the performance of his duties under this Act, that any person has committed an offence under the Exchange Control Act, or the Customs Ordinance, he may communicate or deliver to the Controller of Exchange or the Director-General of Customs, as the case may be, any information relating to the commission of the offence or any articles, books of account or the documents necessary or useful for the purpose of proving the commission of such offence.

(11) Where the Commissioner-General has under subsection (10) communicated or delivered to the Controller of Exchange or the Director- General of Customs any information relating to the Commission, or any articles, books of account or other documents necessary or useful for the purpose of proving the commission, by any person of an offence under the Exchange Control Act, or the Customs Ordinance, as the case may be, the Commissioner-General or any other officer of the Department of Inland Revenue may, notwithstanding anything to the contrary in the preceding provisions of this section, in any proceedings against such person for that offence give evidence relating to such information, articles, books of account or other documents and produce or cause to be produced any returns, books of account, other documents or articles he may be required to produce in such proceedings. The Commissioner-General or such other officer may produce or cause to be produced, in court for the purpose of such proceedings, a copy of any particulars contained in any return, books of account or other document, and such copy shall, notwithstanding anything in the Evidence Ordinance relating to the proof of documents, be admissible in evidence:

Provided that the Commissioner-General or other officer –

(12) Nothing in the preceding provisions of this section shall be read or construed as empowering the Minister or the Secretary to the Ministry of the Minister to have access to or to examine, any records or documents relating to the affairs of any person, in the possession, custody or control of the Commissioner-General.

(1) The Minister may make regulations in respect of matters required by this Act to be prescribed or in respect of matters authorised by this Act to be made.

(2) Every regulation made by the Minister shall come into operation on the date of its publication in the Gazette or on such date as may be specified in the regulation.

(3) Every regulation shall within two months after its publication in the Gazette be brought before the parliament for approval. Any such regulation which is not so approved shall be deemed to be rescinded as from the date of disapproval but without prejudice to anything previously done thereunder. A notification of the date on which a regulation is deemed to be rescinded shall be published in the Gazette .

(1) Where the Commissioner – General is satisfied that a registered person or any other person, as the case may be, on or after August 1, 2002. has paid tax on the acquisition of goods for the purpose of making an exempt supply, the tax so paid by such person shall be deemed to be input tax at the point, if any, such supply subsequently becomes a taxable supply and the goods so acquired in the first instance are used in making such taxable supply : Provided however that where the goods so acquired are used only partly for the purpose of making a taxable supply, the Commissioner-General shall determine the portion of such input tax which may be allowed, taking ;into consideration the value of acquisition of the person making the taxable supplies, the period of use and any other matter as may be relevant:

Provided further, that where any goods or services that are acquired have been used wholly and exclusively in making exempt supplies, then any input tax relating to such goods or services shall not be allowed as input tax on the supply of taxable supplies, owing to a change in status of such goods or services from that of exempt supplies to taxable supplies:

Provided further that where any goods or services that are acquired have been used in making a taxable supply and any input tax has been claimed and allowed, then any portion of such input tax allowed, which is attributable to an exempt supply at the point if any, if such supply subsequently becomes an exempt supply, except in the case of providing leasing facilities for three wheelers, then notwithstanding the provisions of section 22, be disallowed within the taxable period in which such taxable supply becomes an exempt supply.

(2) Any person, other than a specified institution to whom the provisions of Chapter IIIA of this Act applies, liable to pay any sum to the Commissioner-General for the period commencing on July 1, 2003 and ending on the last date of the month in which this Act is certified as an Act of Parliament, shall be deemed to have paid such sum liable to be paid on or before the due date, if he pays such sum to the Commissioner-General on or before the last day of the month in which this Act is certified. Where such sum is not paid on or before such date such sum shall be deemed to be in default from the due date of such sum and such person shall be deemed to be a defaulter with effect from that date.”;

(1) Where it is proved to the satisfaction of the Commissioner-General on a claim made in writing on or before December 31. 2002. that any registered person has paid the National Security Levy under section 5A of the National Security Levy Act, No. 52 of 1991 on the importation into Sri Lanka of any article, for sale without using such article in the manufacture of any other goods by such person prior to August 1,2002 and the supply of such articles is taxable at the rate of twelve and one half per centum prior to August 1, 2002 under the Goods and Services lax Act, No. 34 of 1996, and such Articles imported or a portion thereof are remaining as stock-in-trade as at July 31. 2002 of such registered person and if such stock-in-trade will be supplied in the course of making taxable supplies under this Act, such National Security Levy paid in full or part shall be deemed to be input tax and may be allowed as input tax credit under section 22 during any taxable period commencing from the taxable period in which such claim was accepted by the Commissioner-General.

(2) any excess of input tax attributable to such deemed input tax shall not be refunded but carried forward to the next taxable period and so on notwithstanding the provisions of subsection (3) of section 22.

(3) Any excess claim or undue claim under subsection (1) and allowed as input credit shall be considered as excess input tax claimed and shall be assessed under subsection (7) of section 22

(1)

under the Goods and Services Tax Act. No. 34 of 1996 and in force on the day immediately preceding August 1, 2002. shall be deemed to be directions, notifications, regulations and forms issued under this Act and shall be in force until such directions, notifications, regulations and forms are rescinded or replaced by directions, notification or regulations made under this Act.

(2) Every person registered under section 15 of the Goods and Services Tax Act- No. 34 of 1996 shall be deemed to be a registered person under this Act and every certificate of registration issued and every tax registration number assigned to a registered person under section 15 of the Goods and Services Tax Act, No. 34 of 1996 and in force on the day preceding August 1. 2002 shall be deemed for all purposes to be a certificate of registration issued and a tax registration number assigned under this Act.

(a) any two or more companies which consist of the same shareholders or are managed and controlled by the same directors or by the same company; or

(b) any company and any share holder where such share holder or the spouse or child of such shareholder or any trustee of such shareholder or any trustee of the spouse or the child of such shareholder hold jointly or severally twenty five per centum or more of the paid up capital or twenty five per centum or more of the nominal value of the allotted shares of that company ; or

(c) any two individuals one of whom is the spouse or child of the other or is a trustee for such spouse or child; or

(d) a partnership and an individual where such individual is related to any partner of such partnership ; or

(e) a joint venture and any person who is related to a member of such joint venture ; or

(f) any two persons one of whom is a trustee for the other ;

(g)any two individuals related to each other ; or

(h)any two or more persons carrying on any activity separately or jointly which has resulted in the supply of identical goods or services which cannot be produced by any other person or persons.

(a) a bonded warehouse approved under section 69 of Customs Ordinance ;

(b)a bonded warehouse approved under section 84A of Customs Ordinance;

(c)a warehouse of the Republic as defined in section 167 of Customs Ordinance ;

(d)a Free Trade Zone declared by the Board of Investment of Sri Lanka which is subject to monitoring by the Department of Customs.

(a) a highest educational institution established under the Universities Act, No 16 of 1978 or the Buddhist and Pali University Act, No 74 of 1981.

(b) any recognized institution providing vocational training or naming for persons engaged in any trade, profession, or employment and includes an incorporated examination body ;

(c) any institution providing vocational training or practical training and

(d) an institution which has entered into an agreement with the Board of Investment of Sri Lanka under section 17 of the Board of Investment of Sri Lanka Law No. 4 of 1978, with a minimum investment of not less than rupees fifteen million providing vocational training or practical training in the areas of information technology, vocational training, management training, skills development or training for foreign employment, textile and clothing, nursing, food processing, agricultural plantation or industrial.

(a) money;

(b) computer software made to customers special requirements either’ as unique programme or adaptation for standard programme, inter company information data and accounts, enhancement and update of existing specific programmes, enhancement and update of existing normalized programmes supplied under contractual obligation to customers who have bought the original programme or where the value of contents separately identifiable in a software such value of contents ;