As enacted

Contents

7. Insertion of new section 26A in the principal enactment

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

The following new section is hereby inserted immediately after section 26 of the principal enactment and shall have effect as section 26A of that enactment :—

26A. (1) Every Government Agency which makes payment in pursuance of a contract to which such Agency is a party or on behalf of any other person who is a party to a contract shall, deduct from such payment one-third of the tax included in such payment, and the amount of tax so deducted shall be a debt due from such Government Agency to the Republic and shall be recoverable forthwith or may be assessed and charged upon such Government

Agency in addition to any tax, if any, otherwise payable by such Government Agency under this

Act :

Provided that no such deduction shall be made —

(i)

where the total consideration for the performance of such contract does not exceed five hundred thousand rupees excluding the Value Added Tax; or

“Deduction of tax from payments.

(ii)

where the payment made is an immediate settlement for the goods supplied on contract ; or

(iii)

where the Commissioner-General is of the opinion that deduction is impracticable or inexpedient having regard to all the circumstances of the case.

(2)

Any Government Agency who deducts tax in accordance with the provisions of subsection (1) shall —

(a)

issue to the person from whose payment the deduction is made, a Certificate showing —

(i)

the gross amount of payment ;

(ii)

the total tax and the amount of one-third of the tax so deducted ;

and

(iii)

the net amount actually paid; and

(b)

remit the tax so deducted in any calendar month on or before the end of the first week of the subsequent month to the

Commissioner-General together with the statement showing—

(i)

the name and address of the person to whom the payment was made and the registration number of such person ;

(ii)

the gross amount of such payment ;

(iii)

the total tax, one-third of the tax deducted and the amount actually paid ;

(iv)

the name and address of the

Government Agency who made the payment and the registration number, if any ; and

(v)

details of remittances, the cheque numbers and the date of payment.

(3)

Where the taxable supplies of a person includes a sum from which tax has been deducted and remitted in accordance with subsection (1) and (2), he shall be entitled on production of the Certificate relating to such sum issued in accordance with subsection (2), to set off against the tax payable by him the amount shown in the Certificate as the amount of tax deducted.

(4)

For the purposes of this section

“contract” means —

(i)

any contract in respect of construction work or services of whatever nature not being a contract of employment ;

(ii)

any contract for the supply of goods or services in respect of any contract specified in sub-paragraph (i) ;

(iii)

any sub contract in respect of any contract specified in sub-paragraphs (i)

or (ii) ; or

(iv)

any contract for the provision of services including a contract for the provision of services as an entertainer or artist other than a contract of employment.

(5)

For the purposes of this section

“Government Agency” means any Ministry,

Department, Government Owned Business

Undertaking, public corporation, Provincial

Council, local authority, University, State bank, project funded by any Government institution for which funds are provided from the

Consolidated Fund and the Board of Investment.

(6)

Where any person fails to deduct tax in terms of subsection (1) or fails to remit under sub section (2) any tax payable to the

Commissioner General, such tax shall be deemed to be in default and the provision of this Act relating to the recovery of tax shall accordingly apply on any such default tax.

(7)

Any person who has made any deduction under subsection (1) or any remittance in pursuance of subsection (2) shall be deemed to have acted under the authority of the person by whom the tax was payable and of all other persons concerned, and is hereby indemnified in respect of such deduction or remittances as the case may be, against all proceedings, civil or criminal, notwithstanding the provision of any written law, contract or agreement.

Read on from s 8