A summary of tax proposals made in the National Budget – 2022 as per the said Budget Speech is set out below.
Imposition of New Taxes
- Tax surcharge – A one-time tax surcharge of 25% on individuals or companies with taxable income over Rs. 2 Bn for the year of assessment 2020/2021.
- Social Security Contribution – contribution at 2.5% on the annual turnover exceeding Rs. 120 Mn., with effective from 01st April 2022.
- Special Goods and Services Tax (“GST”) – Based on the National Budget proposals for 2021, a Special Goods and Services Tax was proposed to be introduced on alcohol, cigarette, vehicles, telecommunication, betting and gaming to streamline the multiple taxes that are applicable on these products. The current budget proposes that this will be implemented from January 2022.
Value Added Tax (VAT)
- VAT on banks and financial service providers under supply of financial services by specified institutions;
- Increase of rate by 3% (from 15% to 18%)
- Payable monthly, during the year 2022
- Prohibition on passing the same to the customers
- Exemptions
Import or supply of medical equipment, machinery, apparatus, accessories and parts thereof and hospital furniture, drugs and chemicals, donated to a government hospital or the Ministry of Health for the provision of health services to address any pandemic or public health emergency, approved by the Minister of Finance on the recommendation of the Secretary to the Ministry of Health, w.e.f. 01st January 2022.
- Amendments to the legislation dealing with VAT to rectify ambiguities.
Other taxes
- Cigarettes – Excise duty on Cigarettes is increased, where the price of a cigarette will be increased by Rs. 5/-.
- Liquor – increase in Excise duty, with immediate effect.
Other Fees
- A fee on vehicles meeting with accidents with provisions for reimbursing the same from the insurance. A fee on vehicle modification, alteration, and refurbishment.
- Fines to legally register illegal motor cars and motor cycles, if they are in a condition suitable for road, during an amnesty period.
- Release of all vehicles at Sri Lanka Customs (SLC) due to non-payment of tax or other reasons, subject to clearing relevant taxes and a fine.
- A license fee under goods and service tax for the designated areas to be developed as special zones for leisure activities
Tax Administration
- Strengthen the Large Tax Payers Unit (LTU) and Upper Corporate Unit (UCU) at the Department of Inland Revenue (DIR) to improve revenue collection from large tax payers.
- Removal of weaknesses in the digital revenue collection systems of the revenue collection bodies; Revenue Administration Management Information System (RAMIS) of the DIR and Single Window System of the SLC.
- Introduction of a mechanism to examine the accuracy of the tax documents, when filing through digital systems.
- Establishment of legal provision in applying technological process for tax administration while changing the process of evading tax by payment of certain penalties.
- Permit presentation of digital invoices and documents as valid documents.
- Expediting the implementation of the digital revenue collection system of the Excise Department.
