6. Amendment of section 22 of the principal enactment

Official English translation. Where it differs from the Sinhala or Tamil text, the Act itself says which text prevails.

Section 22 of the principal enactment is hereby amended as follows :—

(1)

in the proviso to subsection (3) of that section, by the substitution for the words from “goods supplied under a leasing agreement for a period less than three years” to the end of that proviso of the following :—

“goods supplied under a finance leasing agreement entered into on or after July 1, 2003 but prior to

January 1, 2004 shall be counted at the rate of ten per centum or less, even if the tax charged on such goods is more than ten per centum :

Provided further, that any person who accounts for the out put tax on all or part of his taxable supplies at the rate of ten per centum shall be entitled to deduct as input tax in relation to such supplies as is allowable under this Act only at the rate of ten per centum even where such person has paid the input tax at a higher rate than the rate of ten per centum on the value of such supplies received by him, other than in the case of a lorry, motor coach or wagon.

For the purpose of this subsection —

“lorry” and “motor coach” shall have the respective meanings as assigned to them in the Motor

Traffic Act (Chapter 203); and

“wagon” shall have the same meaning as assigned to it in the Finance Act, No.16 of 1995.”.

(2)

by the repeal of subsection (4) of that section and by the substitution therefor of the following subsection :—

“(4) Where an unregistered person leases out his land and buildings in terms of a tenancy agreement to a registered person, such registered person shall, notwithstanding that the unregistered person is not entitled to claim any input tax in respect of any expenses incurred in connection with the services provided on such land and buildings by another registered person, be entitled to claim such amount of input tax as determined by the Commissioner-General for the expenses incurred by him on such services provided on such land and buildings for the duration of such tenancy agreement if such registered person provides sufficient evidence to the satisfaction of the Commissioner-General to enable him to determine the amount of such input tax which such registered person is entitled to claim.”;

(3)

in subsection (5) of that section, by the substitution for all the words from “Where an unregistered person” to the words “in respect of such land and buildings :” of the words —

“(5) Where any return is furnished under subsection (1) or (2) of section 21 and if at the end of the taxable period to which such return relates the amount of the input tax allowable under this

Act exceeds the amount of the output tax, the excess of the input tax shall not be refunded but shall be set off against the output tax of the succeeding taxable period and so on. Any residue of such excess as has not been so set off in the period of six months from the end of the taxable period in which such excess first arose, shall, subject to the provisions of subsection (3) of section 58, be refunded; and where it is not so refunded the

Commissioner-General shall pay interest, at such rate prescribed under section 59 on such amount for the period commencing on the expiration of one month from the end of the taxable period in which such refund became due and ending on the date of the refund subject to the provisions of the proviso to section 59 :

Provided that where any residue of any excess input tax refundable on or after August 1, 2002 under the Goods and Services Tax Act, No. 34 of 1996 is outstanding on August 1, 2002, such excess shall not be deducted from any output tax due for any taxable period under this Act, but shall accordingly be refunded under the Goods and Services Tax Act,

No. 34 of 1996 :”;

(4)

in subsection (7) of that section —

(i)

by the substitution for all the words from “any project” to “from such commencement” of the following :—

“any project in Sri Lanka, and undertakes to make taxable supplies in respect of such business or project within a period of thirty months from commencement of such operation, then”; and

(ii)

by the substitution for all the words from “to make taxable supplies” to the end of that subsection of the following :—

“to commence the making of taxable supplies, he may extend the period on the basis of an application made by such registered person to that effect :

Provided that any person, who is already registered for an existing business or project shall inform the Commissioner-General of such fact and request that such registration be extended to include any new business or project. The provisions of this subsection shall thereupon apply to such new business or project.”; and

(5)

by the addition immediately after subsection (8) of that section of the following new subsection :—

“(9) Notwithstanding the provisions of the first proviso and second proviso to subsection (3), any registered person who, for any taxable period commencing from January 1, 2004, makes a taxable supply, other than any zero rated supply or a supply which has continuously been taxed at the rate of ten per centum, shall be entitled to deduct as input tax seventy five per centum of such input tax paid at the rate of twenty per centum on the value of such supplies received by him :

Provided that where the input tax is related to a taxable period prior to January 1, 2004, any registered person who has made any taxable supply which was liable to tax at the rate of twenty per centum, shall not be subject to the above limitation.”.

Read on from s 7