Budget Highlights 2008

* In a bid to cushion the effect of increasing global crude oil prices, the government has proposed to omit 10% of the VAT charged on every litre of petrol, but Diesel and Kerosene prices would unchanged for the moment.

* Profits and income of Co-operative Societies and associated rural banks will be exempted from income tax for 5 years. Therefore, the existing 5% income tax rate will be removed.

* To increase the local milk production, the government has decided to increase the guaranteed price of milk to Rs.30-40 per litre range and the credit facilities will be provided at concessionary rates for the importation of milking cows and the development of small and medium milk processing centers.
* Nagenahira Udanaya Profits and income of any new undertaking will be exempted for a period of five years, if the investment is over Rs.50 million, and it generates employment opportunities for more than 50 persons. Also if the interest accrues to any financial institution from the loans granted to such projects will also be exempted.

* Sri Lankans residing abroad who make investments in the Non-resident Homeland Development Bonds will be qualified for property transfer tax (present tax rate 100% ) and the interest arising from such bonds will be exempted from Income Tax.

* The losses incurred from the leasing sector of a particular business can only be set off against the profits from the same business. Further it restricts using profits earned from other sectors in offsetting the losses.

* Profits and income from the exports after cutting and polishing of gems imported in raw forms will be exempted from income tax and 2.5% income tax will be charged on the value of gems sold at the gem auctions conducted under the sponsorship from the State Gem Corporation which will be a final tax.

* Excise duty on liquor increased by Rs.35 per bottle and Rs.2 per cigarette. In addition the increase in Economic Service Charge (ESC) from 0.5% to 1% will also affect the liquor industry.

* Levy of 2.5% on excisable (excluding three wheelers) vehicles have been proposed.

* Customs duty on chemicals used in the ceramic industry has received reduction and exemption.

* Option will be granted to any company, which re-locates its operations, outside Colombo and Gampaha districts either to claim investment relief for total relocation expenditure or to claim 5 years tax holiday and the date of completion of investment to qualify for the tax holiday in districts, other than Colombo and Gampaha will be extended till March, 2009.

* For services provided by any person or partnership in Sri Lanka to person or a partnership outside Sri Lanka the profits and income (salaries, allowances or fees is exempted) and dividend on interest investment outside Sri Lanka. These exemptions will be provided if such earnings are remitted to Sri Lanka through the Sri Lankan banking system.

* Televisions which have a screen size of over 30 inches have been proposed Customs duty of 28% (previously 15%).

* Current tax holidays granted under Inland Revenue Act or BOI Law is restricted to three years. No further holiday period after the expiry of three years within the holiday granted.

* Exemption of employee benefit on company shares will be available, if the Commissioner General of Inland Revenue is satisfied that the scheme for issue of shares is a reasonable one.