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Thursday, 9 January 2020 02:00 - - {{hitsCtrl.values.hits}}
On the instructions of the Finance Ministry, the Inland Revenue Department (IRD) has announced it will entertain voluntary registration for the Value Added Tax (VAT) a move coming a fortnight after it deactivated over 50,000 previously registered persons/enterprises as part of the new Government’s stimulus package.
Though the standard practice is that a person/enterprise must apply for de-registration and the Commissioner General must give approval, to convey that new VAT relief is effective from 1 January, the Government directed the IRD to deactivate over 50,000 previously registered persons/enterprises in one go.
This was on account of the Government deciding the value of taxable supplies for the purpose of registration for VAT (VAT registration threshold) should be increased to Rs. 75 million per quarter or Rs. 300 million per annum with effect from 1 January.
This was subject to formal amendments to the Value Added Tax Act, No. 14 of 2002, to be passed in Parliament.
Accordingly, VAT registration of persons of whose taxable supply has never exceeded Rs. 75 million for any taxable period ended prior to December 31, 2019, was deactivated with effect from 1 January.
However, IRD said via a public notice on Tuesday, “as instructed by the Ministry of Finance on Monday 6 January 2020, subject to formal amendments to the Value Added Tax Act, No. 14 of 2002, to be passed in Parliament, any person whose taxable supply is less than Rs. 75 million rupees per quarter or 300 million rupees per annum can request for registration for VAT.”
As per the Voluntary Registration for VAT procedure, any person who wishes to continue the VAT registration (whose registration is inactivated) should make a request to the Commissioner, Customer Information Update Unit of the Inland Revenue head office, or any nearest Regional Office to activate the registration, or any person who wishes to obtain a new VAT registration can make a request in the form specified, along with the required documents to the Commissioner Tax Registration Unit or any nearest Regional Office.
Tax experts told the Daily FT that the fresh announcement of entertaining voluntary registration by those who were deactivated a fortnight ago, was to ensure business continuity of those who are reliant on supplying to VAT-registered buyers, even though the former’s turnover is less than the revised threshold.
Companies prefer to source from VAT-registered suppliers to claim input VAT.
Input VAT is the value added tax added to the price when you purchase goods or services that are liable to VAT. If the person or businesses that is buying is registered for VAT, they can deduct the amount of VAT paid from his/her settlement with the tax authorities.
Experts said re-registration requires fresh documentation and is time consuming, and could have been avoided if the Government had not deactivated all registrations below the Rs. 75 million turnover per quarter threshold in one go, but had instead offered them the option to opt out of the VAT system.
A list of deactivated VAT registered persons/enterprises with the details of name of the person and VAT registration number is published in the Inland Revenue web portal, which could be downloaded via: www.ird.gov.lk
Such deactivated persons/enterprises are not permitted to collect VAT on the supplies made on or after 1 January. Further, such persons/enterprises are required to surrender their VAT Registration Certificate to the Commissioner, the Customer Information Update Unit of the Inland Revenue head office, or any nearest regional office.
However, VAT collected prior to January 01, 2020, shall be paid on or before January 20, 2020, and the VAT return shall be submitted for the period as usual.
