Simplified Value Added Tax scheme
S R Balachandran
In the past exporters of this country had a genuine grievance that
the VAT input was not refunded on time which results in cash difficulty.
Further, massive fraud in the Inland Revenue Department had occurred
by paying bogus refund claims submitted by fraudulent exporters.
The government has introduced a new system effective April 1, 2011
called Simplified Value Added Tax Scheme (SVAT).
This scheme if properly implemented removes the cash difficulty faced
by exporters and this is a stimulation for exports which is very
essential for the country. Further the possibility of fraud is also
diminished as there is no cash involvement.
Though this is called a Simplified System I am of the opinion that
the compliance is a little difficult unless it is correctly understood
by all. The Inland Revenue Department had several seminars in the past
either direct or through Trade Chambers to educate the public. I quote
below the following in this regard.
Registration
a. Only VAT registered person as well as the suppliers of
goods and service to such registered person (not including optional VAT
payers) are entitled to be registered.
b. Those who were under scheme operated by EDB or TQB should
also be registered under this scheme.
c. Registration should be done under the enrolment form SVAT -
01.
d. There are two parties
i. Registered, Identified, Purchaser (RIP)
ii. Registered, Identified, Supplier (RIS)
e. The following have to be registered together with their
suppliers.
i. Exporters (providers of zero rated services under section 7
of the VAT Act)
ii. Registered persons engaged in any Specific Project
referred to in sub paragraph (ii) of Paragraph (f) PART II of First
Schedule of the VAT Act.
iii. Persons registered under Section 22 (7), and who are
entitled to claim input tax under the Act.
iv. Manufacturers who supply goods manufactured in Sri Lanka
(liable to VAT) to exporters to be utilized for manufacture of goods to
be exported.
v. Suppliers who provide value added services to exporters
which results in the improvement of the quality, character or value of
any goods manufactured for export.
f. Exporters (e i. - qualify for registration only when his
zero rated supplies is more than 50 percent of his total taxable
supplies.
g. Persons under e.iv and e.v qualify as RTP only when his
suspended supplies (including zero rate supplies) if any is more than 50
percent of his total taxable supplies.
h. RIP before making purchases from a supplier should request
him to register under RIS. A back dated registration is considered for a
period not more than 14 days.
Operation
i. RIP could purchase only from RIS. He (RIP) could make local
supplies on suspended terms but the total zero rated supplies for a
calendar month should be more than 50 percent of his total supplies.
ii. RIS cannot purchase goods on suspended terms unless he has
registered under RIP as well. If total suspended supplies to an RIP by
an RIS is more than 50 percent of his total supplies for a calendar
month he could be accorded RTP status as well.
Credit vouchers (SVCV)
i. RTP could be provided with simplified VAT credit vouchers (SVCV)
in the serial order by the Department of Inland Revenue. A book would
contain 50 credit vouchers.
ii. It must be signed by two authorized persons (signatories).
Their details (name, specimen signature and NIC No.). should be provided
to the department.
Any changes should be advised immediately.
iii. Two people should be authorized to collect SVCV Books.
Their details should be registered with the Department of Inland
Revenue.
iv. SVCV should be issued by the RIP to his respective RIS
within 14 days from the end of any calendar month in which such
purchases were made.
v. RIP is required to issue one credit voucher considering the
aggregate purchases made during the one calendar month. Individual
credit voucher for every transaction is not necessary.
vi. SVCV will be valid only up to the date of filing the VAT
return.
If not claimed on time respective supplies relating to such voucher
would be considered as taxable supplies and VAT has to be paid.
vii. If SVCV is not issued by the RIP on time matter could be
referred to Department of Inland Revenue for stern action. They may
cancel the RIP status given and refuses to issue further SVCV as well.
They may impose penalty as well.
Documentation
The following documents are specified.
a) Registration Form - (SVAT 01)
b) Suspended VAT invoice used for supplies without charging
VAT -(SVAT 02)
c) Simplified VAT Credit Voucher - SVCV
d) Total output declaration - (SVAT 03)
e) Confirmation of the supply from both parties - (SVAT 04)
f) Monthly supplementary declaration form (SVAT 05)
g) Suspended debit notes declaration form (SVAT 05 (a)
h) Suspended credit notes declaration form (SVAT 05 (b)
i) Summary of the suspended supplies (SVAT 06)
j) Reconciliation of cancellation of credit vouchers form (SVAT
06 (a)
k) Summary of the suspended supplies - (SVAT 07)
Submission
a. All RIPs should send all necessary forms and details in
relation to calendar month with two copies of acknowledgment., the form
of which can be downloaded from the website. All forms such as SVAT 03,
06, and 06(a) should be handed over to the simplified VAT Unit on or
before 30th day of the following month.
b. All computer generated Suspended Tax Invoices (SVAT 02)
should be e-mailed as per the given data specification in a TEXT format.
c. All RISs should send all necessary forms and details in
relation to a calendar month as per the covering letter which can be
downloaded from the Web-site with a copy and all SVAT 03, 04, 05, 05(a),
05(b), 07 should be handed over to the simplified VAT Unit on or before
30th day of the following month.
Returns
a. All RIPs and RISs should submit VAT returns monthly
b. All RISs who have been accorded RIPs status as well should
submit their VAT returns on monthly basis. All RISs other than above
should submit their VAT Returns on quarterly basis.
c. VAT returns should be submitted to the Data Processing and
Revenue Accounting Unit (DPRU) on the seventh floor of the Inland
Revenue Building except registered persons who make supplies to special
projects. Such persons should furnish their return to the commissioner,
VAT Unit which is on the second floor. All VAT returns should be
furnished on or before 20th day of the following month.
I presume I have elucidated the correct position for due compliance.
Interested parties could obtain further clarification from the Inland
Revenue Department or their tax consultants. The guidelines issued by
the Inland Revenue Department are subject to amendments from time to
time. It is very important for the Inland Revenue Department to advise
the public through the press early.
The writer is a Council Member of the National Chamber of Commerce
of Sri Lanka |
