Business

Budget’s 1st June taxes still not gazetted

By Madhusha Thavapalakumar

None of the new taxes that were proposed in Budget 2019 and were initially scheduled to come into effect from 1 June have been gazetted yet, The Sunday Morning Business learnt.

The delay in drafting the relevant gazettes and amending the necessary Acts are partly due to the Easter Sunday attacks and partly due to insufficient time, and is expected to be delayed by at least one month.

Ministry of Finance – Department of Fiscal Policy Director General K.A. Vimalenthirarajah told The Sunday Morning Business that implementation of the taxes requires amendment in the relevant Acts.

“All the documents are with the Department of Legal Draftsman and the Department of Attorney General at the moment. We are waiting for their clearance.”

Accordingly, upon the clearance from the aforementioned two departments, amended Acts will be submitted to Parliament and the gazette will be issued subsequently.

Budget 2019 introduced a 3.5% Nation Building Tax (NBT) in place of existing stamp duty on all foreign payments made through any credit cards and debit cards to capture revenue from off-shore digital services.

The Budget also introduced a 15% Value Added Tax (VAT) on apartment sales, following which condominium developers began lobbying for VAT exemptions for ongoing projects. Their argument was that they have neared the completion of construction work and imposing VAT on these apartments is unreasonable as all their contracts and pricing has been based on previously existing tariffs.

However, despite opposition from condominium developers, the Government decided to implement the VAT from 1 April, but has once again failed to implement due to procedural delays.

When the VAT comes into effect, only the apartments which enter into sales and purchase agreements (SPA) after the bill will be subjected to VAT. The levy would be imposed in accordance with the Government Gazette issued in August 2018, “Value Added Tax (Amendment) Act No. 25 of 2018”.

The proposal to introduce NBT on the manufacture of cigarettes effective from 1 June too requires amendment in the relevant Act, Vimalenthirarajah stated, adding that it came into effect from 1 June.

“Cigarette manufacturing companies pay their taxes on a quarterly basis or annual basis. By the time they pay taxes from their revenue at the end of the second quarter or at the end of 2019, we will levy the tax with effect from 1 June.”

Budget 2019 also proposed an increment of custom duty on imported fruit drinks with effect from 1 June. Department of Fiscal Policy expects to receive the amended Act for this particular proposal within this week.