IRD records around Rs.70 m in VAT defaults
View(s):Sri Lanka’s Inland Revenue Department (IRD) has incurred a revenue loss of around Rs. 70 million last year, due to Value Added Tax (VAT) defaults involving Ceylon Fertilizer Company and seven other private institutions, the Auditor General Department’s recent report revealed.
The IRD removed nearly 54,000 businesses from the books from VAT payments earlier this month, following the VAT rate revision to 8 per cent from a previous 15 per cent, with effect from December 2019.
Such inactivated persons are not permitted to collect VAT on the supplies made on or after January 1, 2020, and are required to surrender their VAT Registration Certificate to the IRD, the report said.
The IRD announced that they have found businesses that have been charging VAT above the reduced rate of 8 per cent and it will take legal action against those who refuse to comply with the department’s instructions.
IRD had sustained a loss of Rs.8.19 million that should have been recovered as VAT for invoices valued at Rs.54.68 million to six institutions which had supplied services to the Colombo Commercial Fertilizers Ltd during a period in which these companies have not been registered for VAT, the report divulged.
The Colombo Commercial Fertilizers Ltd. had obtained services to an invoiced value of Rs.154.09 million during the period in which the registration of VAT of these private institutions was inactive.
A sum of Rs.16.41 million had been paid by Colombo Commercial Fertilizers Ltd to the said private institutions during the period from June 2013 to March 2019 without ascertaining the activation of VAT.
The VAT had not been paid to the IRD by the said private institutions, the AG’s report revealed.
Before making payments to suppliers, the Ceylon Fertilizer Company Ltd had made an illegal payment of Rs.5.94 million on VAT so as to validate its recovery as at the date of payment without ascertaining the activation from the IRD.
Action had not been taken as well to provide information of the suppliers who had paid such tax.
The VAT recovered from the invoiced income for supply of services by another private institution in Dambulla had not been paid to the IRD.
A sum totaling Rs.67.51 million including the unpaid income tax along with the additional tax and penalties imposed therefore by the IRD was payable by the said company to the IRD.
Out of the said payable amount, a sum of Rs.6 million out of Rs. 67.51 million had been paid by the said company to the IRD by cheque. This private institution had been registered for VAT on 26 August 2019, the AG’s report disclosed.
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