Tax concessions and benefits for public servants announced during VoA

finance-minister-mangala


Oct 28, 2019 (LBO) – Finance Minister Mangala Samaraweera announced tax concessions and benefits for public servants at the time of presenting the Vote on Account, recently in parliament.

The Vote on Account presented by Finance Minister Mangala Samaraweera in parliament for the first 4 months of 2020 was passed unanimously.

Recurrent and capital expenditure for Rs.1, 470 billions is expected to be spent during that period and another Rs.05 billion is expected to be spent for the Advance Account.

While presenting the Vote of Account, the Finance Minister highlighted the reliefs granted to the people in this manner:

  • To increase the Public Servants’ Disaster Loan limit to Rs.350, 000 from Rs.250, 000. To reduce its loan interest to 3% from 4%.
  • To increase the current sum of Rs.6000 granted for public service staff to buy bicycles up to Rs.10, 000 and to reduce its interest to 3% from 4.2%.
  • To increase the current annual Uniform fee for Office Assistants’ Service to Rs.5000/- from Rs.4, 000/-.
  • To increase the Spectacle allowance of Rs.5, 000/- to Rs.8, 000/-. Public servants who have obtained the membership of the National Insurance Trust Fund are entitled to this allowance per a period of three years.
  • To implement a program to provide an annual mandatory training for a minimum of five days for the officers attached to the Public Servant Office Assistant Service, the Drivers Service and the Management Assistants Service.
  • For Grama Seva Officers –
  • To increase the Office Allowance to Rs.1, 500/- within the Municipal Council areas and the Urban Council areas.
  • To double this allowance in Pradeshiya Sabah limits to Rs.1, 000/-.
  • To increase the transport allowance within the local government limit to Rs.600/- from Rs.200/- and, outside the local government limit to Rs.1,000/- from Rs.500/-
  • To increase the annual Stationery allowance to Rs.1, 500/- from Rs.1, 000/- and to increase the Uniform allowance to Rs.4, 300/-.
  • To amalgamate the Communication and Transport allowance and pay a Common allowance of Rs.5, 000/- instead.
  • To increase the War Heroes’ allowance after 20 years.
  • The decision to pay the full salary to disabled War Heroes for lifetime and, thereafter to its benefits to their dependents.
  • To replace the 14-day Composite allowance with a 20-day allowance thereby increasing the salary of Police Officers by 238%.
  1. Excise (Amendment)

Presently there is no provision in the Excise Ordinance for the police officers to initiate proceedings before a magistrate against the offender on matters pertaining to illicit liquor. Therefore, it has resulted in the rapid increase in the trade and consumption of illicit liquor in most part of the country.

Accordingly, Section 35 and 52 of the Excise Ordinance will be amended to authorize the police officers to take legal action on matters pertaining to illicit liquor.

  • Value Added Tax (Amendment)

The Value Added Tax (Amendment) Bill provides for the following Value Added Tax Policies which are approved in the Budget – 2019 and Cabinet decision dated June 25, 2019 on the CP No.19/1781/108/162.

  • Piece based VAT Rate

The piece based VAT rate applicable on domestic sale of certain garments by the export oriented BOI companies will be increased from Rs.75/- to Rs.100/-,

  • Value of Imported Goods

The Minister of Finance will be authorized to prescribe the basis for chargeability of VAT of certain goods specified by the Minister by regulations,

  • Payment date of VAT

VAT payment dates presently fall on 15th, 20th and last date of the month following the each month of a taxable period is inconvenient for the tax payers as well as the tax administration. Considering the requests of the taxpayers, the VAT payment date will be changed to 20th day of the month following the month relevant to such payment.

  • The locally produced rice bran oil, manufactured out of locally produced rice will be exempted from VAT
  • VAT on the supply of condominium housing units

VAT imposed on the supply of condominium housing units will not be charged where the:-

  • Unit price of each condominium housing unit of a condominium housing project does not exceed Rs. 25Mn
  • Agreement to sell relating to such supply is executed as per notaries ordinance prior to the date of commencement of the VAT (Amendment) Act, or
  • Supply of any condominium housing units, which has been completed and in respect of which, the Certificate of Conformity has been obtained from the relevant local authority prior to the date of commencement of VAT (Amendment) Act.

In addition to the above

Reduction of VAT rate applicable on the supply of condominium housing units to 6% and input tax relating to such supply will be counted at 5%.

  • The supply of goods by the construction contractors to their overseas projects will be treated as exports.
  • Nation Building Tax (Amendment)

The Nation Building Tax (Amendment) has been prepared to implement the below mentioned Nation Building Tax Policies which are proposed in the Budget – 2019.

  • Exemption applicable on the importation of unprocessed gem stones will be granted on the approval of National Gem and Jewellery Authority if the payment such services is in foreign currency and remitted to Sri Lanka.
  • Exemption applicable on the services provided by the construction sub-contractors will be extended to the main contractors as well.
  • Exemption of hotel services provide for foreign currency
  • Exemption of importation of Lucerne (alfalfa) meal and pellets.
  • Exemption of locally value added imported palm oil.
  • Exemption of importation of yachts and other vessels for pleasure or sports.
  • Removal of exemption of cigarette.
  • Exemption of projects with an investment of USD 50 Mn or above during the project implementation period or the construction period.
  • Finance Act amendment

The Finance Act amendment provides for the below mentioned Tax Policies which are proposed in the Budget – 2019.

  • Luxury Tax on Motor Vehicles

The definition of “Specified Motor Vehicle” for the applicability of Luxury Tax on Motor Vehicle will be amended to provide for chargeability of the tax based on the price of vehicle instead of engine capacity and specifying the exempt vehicle categories. (For further clarification please refer to the Press Release issued by the Finance Ministry)

  • Levy on Foreign Commercial Transactions.

Levy on Foreign Commercial Transactions will be charged at the rate of 3.5% on the Credit/Debit card payments made to purchase goods/services from outside Sri Lanka. The date of implementation of the Levy will be declared by the Minister by order published in the Gazette.

In addition to the above, following amendments will be moved during the Committee Stage of the Finance Bill.

  • Carbon Tax

The Carbon Tax was imposed under the Finance Act, No.35 of 2018. The tax is payable by the vehicle owners based on the fuel type and the age of the vehicle at the time of renewal of annual registration. This tax is applicable only for this year (2019) and will be removed from December 01, 2019.

  • Cellular Tower Levy

The Cellular Tower levy was imposed under the Finance Act, No.35 of 2018. According to the existing provisions, proceedings to be initiated at the Magistrates Court, if any operator defaults the payment of Levy. Provisions for a surcharge will be introduced if an operator defaults the payment of Levy, prior to initiate Court proceedings.

The Mobile technology is constantly evolving to keep pace with growing demand. The Government’s ambition is to ensure that consumers have excellent connectivity across the Country.

While presenting the Vote of Account, the Finance Minister highlighted the breakdown of the salary increment for public servants as follows:

These salary increases have been calculated based on the P.A.Circular 6/2016 and on the the recommendation of the Ranugge Salaries Commission. Accordingly public servants will be paid half of the new increase from  January 01 2020 and the rest will be paid from January 01, 2021