Question

Glass PLC is a manufacturing company and engaged in the business of wholesale and retail business. The following information has been provided for the quarter ended 31st October 2019. 1. Sales to Wholesale shops : Rs. 7,500,000 2. Sales to end customers : Rs. 6,000,000 3. NBT paid on imported raw materials : Rs. 35,000 4. NBT paid on services : Rs. 50,000 Compute the NBT payable for the quarter ended 31st October 2019

B. Explain the different between exempt suppliers and Zero- rated supplies with reference to Value Added Tax (VAT

C. Roshan is a resident individual and tax payer. He has failed to comply with the statutory requirement to submit an income tax return on or before the due dates. State the applicable penalties for non- compliance with reference to Inland revenue Act No. 24 of 2017.

D. Explain five withholding taxes applicable in Sri Lanka for the year of assessment 2018/19.

Answer 1

Please find below the answers for questions asked in above question i.e. Question A., Question B., Question C. and Question D.:

A.	Computation of NBT payable for the quarter ended 31st October 2019	Amt (in Rs)
[A] Sales to wholesale shops	7,500,000
[B] Sales to end customers	6,000,000
[C] Total Liable turnover = [A] + [B]	13,500,000
[D] One half of the liable turnover from the wholesale or retail sale of any article on which Nil NBT is applicable	6,750,000
[E] Balance liable turnover = [C] - [D]	6,750,000
Less: NBT paid on import of raw materials	35,000
Net liable turnover on which NBT at 2% is applicable	6,715,000
NBT payable for quarter ended 31st October 2019	134,300

B.	Difference between exempt suppliers and Zero- rated supplies with reference to Value Added Tax (VAT)
Zero-rated supplies are goods on which the Sri Lankan government charge standard VAT @ 15% but the rate is currently set to zero. A Non-VAT vendor cannot make a zero-rated supply. In this case, the vendor can claim input tax deductions on the related expenses of the goods and services. This will form the part of the taxable turnover. The vendor must document all his transactions for proof. The goods covered by this classification are items such as children’s clothes and footwear, water, basic foods, books and newspapers.
Exempt supplies are goods on which no VAT is paid or charged but which still need to be recorded on the VAT Return. These are similar to the supplies made by the non-VAT vendor but are not taxable. A vendor can’t claim any input tax deduction if the vendor has not made any exempt supply. This will not be a part of the taxable turnover. This does not need any special documentation as the vendor can’t make any claims for tax. The goods covered by this classification are items such as land, postal services, health services, betting and gaming

C.	Applicable penalties for non- compliance with reference to Inland revenue Act No. 24 of 2017
(a) 5% of the amount of the tax owing plus a further 1% of the amount of tax owing for each month or part of a month during which the failure to file continues and
(b) Rs. 50,000 plus a further Rs. 10,000 for each month or part of a month during which the failure to file continues

D.	Five withholding taxes applicable in Sri Lanka for the year of assessment 2018/19	WHT Rate
a) Interest or discount paid to a person	5%
b) Interest paid to a senior citizen (Subject to relief)	5%
c) Rent paid to a resident person	10%
d) In all other cases (royalty, natural resource payment, dividend, reward etc.)	14%
e) On the each partner’s share of any Partnership Income	8%
f) From the sale price of any gem sold at an auction conducted by the National Gem and Jewellery Authority	3%