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SIMPLIFIED VALUE ADDED TAX (SVAT) SYSTEM
(Instructions to be complied with )
1) Introduction
In terms of the Value Added Tax Amendment Act No. 6 of 2005 and No. 8 of 2006, the Sri Lanka Export Development Board (SLEDB) has been entrusted with the responsibility of registering, monitoring and maintaining records in relation to implementation of the Simplified VAT System introduced to the export sector other than the apparel sector.
2) Concessions
2.1 Suspension of VAT liability of direct exporters on their purchases for export processing from local manufacturers.
2.2 Deferment of VAT on import of raw materials and capital goods by indirect exporters to be used for manufacture of items to be supplied to direct exporters for the purpose of export processing.
3) Eligibility Criteria
3.1 Eligibility Criteria for VAT Suspension Scheme
3.1.1 Both the seller (indirect exporter) and the buyer (direct exporter ) should be VAT registered persons.
3.1.2 Both the seller and buyer should register with the EDB under the SVAT Scheme.
3.1.3 The seller (indirect exporter) should sell raw materials, consumables and accessories (RCA) manufactured locally by himself to direct exporters in the non-apparel sector.Reasonable value addition should be maintained by the seller.
RCA definition is as follows :
i. Locally manufactured articles physically incorporated into the product.
ii. Locally manufactured articles used for packaging.
iii. Locally manufactured articles used as direct consumables used in the manufacture of products.
3.1.4 Any other goods i.e. capital assets, office equipment are not qualified for concessions under the SVAT Scheme.
3.1.5 Goods manufactured should not be exempted items.
3.1.6 Sales should be to an exporter who exports directly.
3.1.7 For the purpose of export processing, both direct (buyer) and indirect exporter (supplier) should import their raw material / inputs only through the Temporary, Importation for Export Processing (TIEP-1) Scheme operated by the Sri Lanka Customs or through the BOI.
3.1.8 Over 51% of the total turnover of the seller should be from direct / indirect exports. However, if the export turnover is 51% or less, he is entitled only to concessions under 4.2 below.
3.1.9 Reasonable value addition should be carried out by the exporter who purchased RCA from an indirect exporter under the SVAT Scheme.
3.2 Eligibility Criteria for VAT Deferment Facility
3.2.1 Manufacturers should fulfill all conditions stipulated for the suspension facility under Section 3.1
3.2.2 Manufacturer should import capital goods through TIEP-4 Scheme and import RCA through TIEP-1 Scheme operated by the Sri Lanka Customs or through BOI.
3.2.3 Inputs (RCA / Plant and machinery) imported under the deferment facility by an indirect exporter should be used for manufacture of goods to be exported directly or through an exporter who operates under TIEP-1 Scheme or under BOI.
4) Concessions Granted under the SVAT Scheme
4.1 Suppliers who fulfill conditions given in 3.1 and 3.2 above whose direct / indirect exports form more that 51% of the total turnover are entitled for the following concessions.
4.1.1 Issuing of Suspended VAT invoices to eligible exporters
4.1.2 Refund of excess VAT payment within 45 days by the IRD.
4.1.3 Import of RCA / Plant and machinery under the Deferment Facility.
4.2 Manufacturers who supply 51% or less of their turnover for exports are entitled only for concessions under 4.1.1. They are not entitled for concessions under 4.1.2 and 4.1.3.
5) Responsibility of Registered Manufacturers
5.1 Issuing of Tax Invoices under the SVAT Scheme
5.1.1 Eligible indirect exporters registered under the SVAT Scheme should strictly adhere to the Circular dated 19.06.2006 issued by the Commissioner General of Inland Revenue (CGIR).
5.1.2 Sales of eligible products to registered direct exporters should be made on a VAT invoice showing the suspended of VAT amount. Specimen of the invoice is given in EDB:Form-3.
5.2 Submission of Information on Transactions under the SVAT Scheme by Indirect Exporter
5.2.1. Registered manufacturers should submit returns monthly to the VAT Division of the HRD.
5.2.2 Information on transactions under the SVAT Scheme with each buyer should also be submitted to the EDB separately. The Goods Declaration Form and the Goods Declaration Supplementary Form described below issued by the EDB along with copies of invoices of the preceding month should be submitted to the EDB before the 15th of each month in order to avoid delays in generating reports on the relevant transactions. Please note that the details of delayed submissions cannot be included in the reports generated for the relevant month and they will be taken into consideration subsequently.
5.2.3. Registered manufacturers can submit information to the EDB through the following optional methods.
5.2.4. They can submit hard copies of invoices and Goods Declaration Form (EDB-2) and the Goods Declaration Supplementary Form (EDB-2a) duly signed by the supplier and the purchaser to the EDB or,
- Registered manufacturers (suppliers) have the option of submitting Goods Declaration Form (EDB-2C) and the Goods Declaration Supplementary Form (EDB-2D) as a single party declaration made by the supplier certifying the supply of goods. However, supplier should submit invoices stamped and signed by the purchaser certifying the delivery and acceptance of goods. A special seal designed for this purpose should be used by the purchaser when certifying the acceptance of goods. The design of the seal should be as follows :
Declaration for Suspended VAT
We hereby confirm that the goods indicated in this invoice were received by us for the manufacture of products for export purposes. In the event of non-compliance of above conditions, we are aware that we are liable to VAT on any transaction made out of these purchases.
Name of the company : ........................................................................................
EDB No. :.................................................................................................................
Authorized signature :..........................................................................................
Date : ......................................................................................................................
- Responsibility of Registered Exporters (Buyers) under the SVAT Scheme
6.1 Exporters should import their RCA through the Sri Lanka Customs operated TIEP-1 Scheme or through BOI.
6.2 They should purchase their RCA from supplier who are registered under the SVAT Scheme and import RCA under the TIEP-1 Scheme or under BOI.
6.3 Exporters who made purchases under the VAT Suspension Scheme should submit information on each transaction through the buyers as a single or both party declaration. If information is submitted as a single party, instructions given in 5.2.5 above should be followed.
- Submission of details of VAT paid purchase of RCA to the IRD.
- Details of import of RCA made under VAT Deferment Scheme (CUSDEC NO. / H. S. No. / Description / Quantity / Value / Deferred VAT amount ).
- Declaration of details on exports made (CUSDEC No. / H. S. No. / Description / Volume / FOB value).
- Any other information or documents requested by CGIR, Sri Lanka Customs, BOI and EDB to prove that goods have been exported.
- Records and copies of relevant document should be maintained by the exporters to prove the exports and local purchases and import of RCA for reconciliation purposes at any time by the CGIR, Sri Lanka Customs, BOI and EDB.
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