GST will be higher than the existing tax - PwC | Daily News

GST will be higher than the existing tax - PwC

Tax Consultants PwC Sri Lanka expects that the newly proposed GST tax will increase the effective rate of taxation against the current framework due to the budget estimates. The GST tax looks to amalgamate special taxes on certain industries and streamline the process.

Alcohol, Tobacco, Telecommunications, Betting and Gaming, and Vehicles will face a Good and Services Tax (GST) as opposed to multiple smaller taxes. Accordingly, special excise duty, telecommunication levy, betting and gaming levy, and special excise duty will be replaced by a GST tax which is to be administered online.

Director, Tax Services, PwC Sri Lanka Charmaine Tillekeratne said, “If you look at the budget estimates the tax revenue is expected to increase next year. The increase may be borne by these industries. The rest of the proposals aren’t revenue-generating.”

“50% of government revenue comes from these industries. One of the ideas behind the change is to make it simpler and administer it online.”

“The mechanism of how it is going to be calculated was not mentioned. It is important to make sure that all the taxes under these levies get captured.”

Tillekeratne was speaking on a PwC in November 17.

As the government is expected to increase revenues from Rs 1.3 trillion to Rs 1.7 trillion in 2021 the Accountants predict that taxation through GST will result in a higher effective rate of tax on these goods.

For corporates with multiple business verticals, the predominancy rule abolished and taxes are now charged based on the source of income.

E-filing will be mandatory for all corporates from 1 April 2021 onwards. The NIC will be used as a Tax Identifier Number. There will be penal provisions under the Inland Revenue Act.

REITs will become more efficient vehicles to own property as they are exempt from capital gains, pay reduced stamp duty at .75%, and shareholders will face no income tax on dividends. To prevent evasion the mechanism for calculating capital gains will take the higher value of either the sale price or the assessed value of a property.

Port City will get special treatment in terms of taxation and foreign exchange controls. Foreign investors in Sri Lanka will only face exemptions on dividends if said dividends are reinvested in Sri Lanka.

Bonded warehouses and all warehouses related to offshore businesses are exempt from all taxes. Pharmaceuticals manufactured in special zones will be exempt from tax.

Rs 2 per dollar above the normal exchange rate will be paid to foreign exchange remittances by foreign workers through the local banking system.

PPE and similar products by BOI companies to the Ministry of Health will be deemed exports for tax purposes.