The tourism sector has been given considerable tax concessions with the reducing of VAT rate from 15% to 8% and the VAT registration limit increased from Rs 12 million to 300 million per year, Commissioner General of Inland Revenue Department (IRD) Nadun Guruge told a group of Association of Small and Medium Entrepreneurs in Tourism (ASMET) representative who visited him yesterday.
These concessions should be passed over to the people and used for the growth of the tourism industry in the country, he urged.
Guruge however said that although according the government policy, entities with an annual turnover of less than Rs 300 million have been included in the inactivation of VAT registration list it is possible for them to exist it and come to VAT active list by making a request with a copy of the original certificate.
He also cautioned companies who are in the inactive list to refrain from collecting VAT and action would be taken against them in the future.
With regard to a request by ASMET to apply a zero VAT rate to tourist sector, Guruge said it should be a policy decision taken by the Finance Ministry. It was however highlighted that that outbound tourism activities such as ticketing and baggage was totally exempted from VAT. Similarly it was brought to the notice that tourism did not fall under category of export and concessions offered to that sector would not be applicable to the tourism sector. Therefore zero VAT rate could not be applied for the tourism sector.
It was also brought to the notice of the Inland Revenue department about online travel agencies such as booking machines and the possibility of bring them under the tax cordon. Here it was disclosed that such entities were also VAT and tax liable if they maintained offices in Sri Lanka. Inland Revenue Department official o queried as to why hotel room rates had not being reduced despite tax reductions. Here ASMET officials queried of the practical aspects of the 60% ceiling to decide on VAT zero eligibility. Inland Revenue officials said the sector should make a request from the government to exempt them for a year or two from VAT. If the government takes a policy decision on zero VAT the IR was pleased to implement it.
ASMET said the waivers of visa fees have not made a big impact on tourist arrivals and it should be re-imposed.
It was also revealed that the removal of Withholding tax (WTH) with regard to individuals payments came to effect from January 1 and WHT with regard to building rent is proposed to be removed from April 1, 2020.
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