This document discusses Value Added Tax (VAT) and Nation Building Tax (NBT) in Sri Lanka. It provides an overview of VAT, including its scope, imposition, registration requirements, computation, and types of supplies. It also discusses NBT, including its imposition on importers, manufacturers, service providers, wholesalers and retailers. Key details include VAT being charged on value addition in manufacturing and distribution chains, and NBT being charged at 2% on liable turnover to finance rebuilding of infrastructure damaged by war.

1. VAT & NBT
Business Taxation
Deen & Company (Chartered Accountants) Y/A 2017/18

2. Taxation of Individuals
- The Scope
- Imposition
- Registration
- Computation
VAT & NBT_Business Taxation 2
Chapter Outline.
D & C (Chartered Accountants)

3. D & C (Chartered Accountants)
VAT & NBT_Business Taxation
3
VALUE ADDED TAX
Introduction.
• Introduced in France in 1954 by Maurice
Laure, Jt. Director of Tax in France.
• Operate in 140 Countries today.
• VAT is charged on value addition in a chain of
manufacturing or distribution.
• VAT is collected bit by bit along the chain and
finally hit the consumer who does not add
value.

4. D & C (Chartered Accountants)
VAT & NBT_Business Taxation
4
VALUE ADDED TAX
The Scope.
Value Addition
The enhancement a product or service before
offering to customers.
Wood Fabric

5. D & C (Chartered Accountants)
VAT & NBT_Business Taxation
5
VALUE ADDED TAX
The Scope.
Value Addition:
Goods Sale Price Value Addition
Forester
Cost
4 4-0 = 40
Sawmills 7 7- 4 = 3
Bat maker's Bat 15 15 - 7 = 8
Retailer’s Bat 25 25- 15 = 10
Wood
4
7
15

6. D & C (Chartered Accountants)
VAT & NBT_Business Taxation
6
VALUE ADDED TAX
The Scope.
Value Addition:
Wood
Goods
Sale
Price
Value
Addition VAT@15%Inc. Price
Forester
Cost
4 4- 0 = 4 4.480.600
Sawmills 7 7- 4 = 3 0.45 7.84
Bat maker's Bat 15 15- 7 = 8 1.20 16.80
Retailer’s Bat 25 25- 15 = 10 1.50 28.75
Total 25 3.75
4
7
15

7. D & C (Chartered Accountants)
VAT & NBT_Business Taxation
7
VALUE ADDED TAX
The Scope.
Value Addition:
Alice is in manufacturing of item ZZB using different materials. She is expecting
your help to calculate her value addition created by her business. Alice has
sold all ZZB at 350/- net each.
Material A 0.25 @ 125 X 500 15,625.00
B 0.015 @ 157 X 500 1,177.50
C 1.25 @ 125 X 500 78,125.00
Wages 1.50 @ 50 X 500 37,500.00
Admin Expense 12,450.00
Selling & Distribution 9,850.00

8. D & C (Chartered Accountants)
VAT & NBT_Business Taxation
8
VALUE ADDED TAX
The Scope.
Value Addition:
Sales 350 X 500 175,000
Value Addition 80,072.50
Material A £ 0.25 @ 125 X 500 15,625.00
B £ 0.015@ 157 X 500 1,177.50
C £ 1.25 @ 125 X 500 78,125.00
94,927.50

9. D & C (Chartered Accountants)
VAT & NBT_Business Taxation
9
VALUE ADDED TAX
- Indirect Tax
- Charged on goods and services supply in Sri
Lanka
- Born by the final consumer
- Introduced by the Act no. 14 of 2002

10. D & C (Chartered Accountants)
VAT & NBT_Business Taxation
10
VALUE ADDED TAX
Goods and Services
- On every taxable supply
- At the time of supply
- In a taxable period
- By a registered person
- In the course of carrying taxable activity
& on the Imports by any person into Sri Lanka
Imposition.

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

12. D & C (Chartered Accountants)
VAT & NBT_Business Taxation
12
VALUE ADDED TAX
Supply of Goods:
Passing of exclusive ownership to another person.
- Sale of goods by public auction
- Transfer of goods under a hire purchase agreement
- Transfer of goods from a taxable activity to a non taxable
activity
Supply of Services:
Any supply which is not a supply of goods for a
consideration.

13. D & C (Chartered Accountants)
VAT & NBT_Business Taxation
13
VALUE ADDED TAX
Types of
Supplies
Zero
rated
Exempted Standard
rate
Out of
Scope
0%
15%
Taxable SuppliesNon-Taxable Supplies
Types of supplies:

14. - Date of Service is performed
- Date of Invoice is issued
- Date of Payment is received
- Date of payment due
- Date of delivery
- Date of Invoice is issued
- Date of Payment received
- Date of payment due
D & C (Chartered Accountants)
VAT & NBT_Business Taxation
14
VALUE ADDED TAX
Time of supplies:
Services
Goods Time
of
Supply
Earliest
of
Iftheinvoiceisissuedwithin
14Days

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

16. D & C (Chartered Accountants)
VAT & NBT_Business Taxation
16
VALUE ADDED TAX
Taxable Activity:
- Business, trade, profession or vocation
- Clubs, Association or organization
Provision of facilities to members/others for consideration,
payment of subscription
- Hiring or leasing of any movable or immovable
property
- Administration of any property
- The exploitation of intangible property

17. D & C (Chartered Accountants)
VAT & NBT_Business Taxation
17
VALUE ADDED TAX
Registration:
- Total value of taxable supplies
three months period > 3Mn
twelve month period > 12Mn
- Total value of taxable supplies likely to be exceed

18. D & C (Chartered Accountants)
VAT & NBT_Business Taxation
18
VALUE ADDED TAX
Computation of VAT:
- Output tax
VAT charged / deemed charged at the time of supply
to the customers during the taxable period.
- Input tax
VAT charged by registered supplier on goods /
services
VAT paid/deferred on imports of goods

19. D & C (Chartered
Accountants)
VAT & NBT_Business Taxation
19
VALUE ADDED TAX
Types of Invoices:
- Tax Invoice
- Tax Inclusive
Invoice
- SVAT Invoice
- CUSDEC
- Supplier name, address and VAT
Reg. No.
- Customer name, address and VAT
Reg. No.
- Date of invoice and serial no.
- Date of supply, description of
goods/services
- Quantity / volume
- Consideration and VAT
- The word TAX INVOICE

20. D & C (Chartered Accountants)
VAT & NBT_Business Taxation
20
NATION BUILDING TAX
Introduction
- Indirect Tax
- Charged on the liable turnover
- Introduced by Act No. 09 of 2009
- Objective is to collect the revenue to
finance for re-building of infrastructure
facilities affected by the war.

21. D & C (Chartered
Accountants)
VAT & NBT_Business Taxation
21
NATION BUILDING TAX
Imposition:
The following persons are liable to pay NBT
- Importer of any article
- Manufacture of any article
- Service providers
- Whole and retail sellers

22. D & C (Chartered Accountants)
VAT & NBT_Business Taxation
22
NATION BUILDING TAX
Imposition:
Article - include any goods, material or any agricultural or
horticultural produce.
Manufacturing - Any process for,
- Making an article
- Assembling or joining any article
- Adopting for sale any article
- Packing, bottling, putting into boxes, cutting into pieces,
cleaning, polishing, wrapping, labeling or in any other way
preparing for sale.

23. D & C (Chartered
Accountants)
VAT & NBT_Business Taxation
23
NATION BUILDING TAX
Taxable Period:
The period for NBT is the relevant quarter. Quarter means the period
of three months commencing from January 1, April 1, July 1 and
October 1 of each year.
Turnover Threshold:
• General Threshold - 3Mn per quarter, 12Mn per annum
• Special Threshold - 25Mn per quarter for,
- Hotel, guest house, restaurant or similar business
- Educational service, supply of labour
- Processing of any locally produced agricultural produce for sale

24. D & C (Chartered Accountants)
VAT & NBT_Business Taxation
24
NATION BUILDING TAX
Computation:
Whole sale &
Retails
Others
Distributors - 2% on ¼ of the
liable turnover
Other - 2% on ½ of the liable
turnover
2% of the liable turnover

25. D & C (Chartered Accountants)VAT & NBT_Business Taxation 25
Special thanks to Damith Gangodawilage of CA Sri Lanka