Economic Service Charge ACT

Arrangement of Sections

1. Short title.

PART I

Imposition of an Economic Service Charge

2. Imposition of an Economic Service Charge.

3. Service charge to be deducted from relevant income tax.

4. Remaining portion of the service charge not to be refunded.

5. Notice of chargeability.

6. Date on which service charge is to be paid.

7. Furnishing of returns.

8. Maintenance of records.

9. Assessor to make assessment in certain cases.

10. Service charge not paid deemed to be in default.

10A. Turnover from Islamic Financial Transaction to be chargeable to Tax.

10B. The use of electronic communications or electronic records.

11. Certain provisions of the Inland Revenue Act to apply.

12. Regulations.

13. Interpretation.

PART II

Amendment of part I of the Finance Act, No. 11 of 2004

14. Amendment of Part I of Act No. 11 of 2004.

15. Part I of the Finance Act No. 11 of 2004 not to apply.

16. Sinhala text to prevail in case of inconsistency.

SCHEDULES

13 of 2006,

15 of 2007,

11 of 2008,

16 of 2009,

11 of 2011,

23 of 2011,

11 of 2012,

6 of 2013,

9 of 2014,

13 of 2015,

7 of 2017.

AN ACT to impose an Economic Service Charge on the relevant turnover of any person or partnership in respect of every quarter of every year of assessment commencing on or after April 1, 2006; to amend Part I of the Finance Act, No. 11 of 2004; and to provide for matters connected therewith or incidental thereto.

[Date of Commencement: 31st March, 2006]

[Note: Amendments made by s 3,4,5 of Act 13 of 2015 not incorporated as not in force.]

 

1. Short title.

This Act may be cited as the Economic Service Charge Act.

PART I

Imposition of an Economic Service Charge

2. Imposition of an Economic Service Charge.

(1) An Economic Service Charge (hereinafter referred to as the “service charge”) shall, subject to the provisions of this Act, be charged from every person and every partnership for every quarter of every year of assessment—

(a) commencing on or after April 1, 2006 (hereinafter in this Act referred to as “a relevant quarter”) in respect of every part of the relevant turnover of such person or partnership for that relevant quarter; and

(b) on the Cost, Insurance and Freight (CIF) value certified by the Director-General of Customs, of such person or partnership—

(i) on or after April 1, 2016, in respect of every consignment of imports of any article subject to Special Commodity Levy under the provisions of Special Commodity Levy Act, No. 48 of 2007;

(ii) on or after November 24, 2016, in respect of every consignment of imports of gold or other precious metal; or

(iii) or after April 1, 2017, in respect of every consignment of imports of motor vehicles,

at the appropriate rates specified in the Schedule I, Schedule II, Schedule III or Schedule IV as the case may be, to this Act:

Provided that, notwithstanding anything to the contrary in this Act and the rates specified in the Schedule I, Schedule II, Schedule III or Schedule IV as the case may be to this Act, the rate of the service charge, chargeable in respect of the turnover arising on or after April 1, 2008, but prior to April 1, 2016 from the export of any articles or goods, shall not exceed 0.25 per centum.

[S 2(1) subs by s 2(1) of Act 7 of 2017.]

(2) Notwithstanding the provisions of subsection (1), the service charge shall not be charged from any person or partnership other than any person or partnership who or which becomes liable to the service charge under paragraph (b) of subsection (1), for any relevant quarter, in circumstances wherein the relevant turnover of such person or partnership for that relevant quarter—

[S 2(2) am by s 2(2)(a) of Act 7 of 2017.]

(a) commencing before March 31, 2007, does not exceed ten million;

[S 2(2)(a) subs by s 2(1) of Act 11 of 2011.]

(b) commencing on or after April 1, 2007, but before April 1, 2011, does not exceed rupees seven million five hundred thousand;

[S 2(2)(b) subs by s 2(1) of Act 11 of 2011.]

(c) commencing on or after April 1, 2011, but before April 1, 2012, does not exceed rupees twenty-five million;

[S 2(2)(c) ins by s 2(2) of Act 11 of 2012.]

(d) commencing on or after April 1, 2012 but prior to April 1, 2017, does not exceed rupees fifty million;

[S 2(2)(d) ins by s 2(2) of Act 11 of 2012; am by s 2(2)(b) of Act 7 of 2017.]

(e) commencing on or after April 1, 2017 does not exceed rupees twelve million and five hundred thousand:

[S 2(2)(e) ins by s 2(2)(c) of Act 7 of 2017.]

Provided that the service charge chargeable from any person or partnership shall in no case exceed—

(i) rupees fifteen million for any relevant quarter ending on or before March 31, 2009 ; and

(ii) rupees thirty million for any relevant quarter commencing on or after April 1, 2009, but prior to April 1, 2016.

[S 2(2) proviso subs by s 2(1) of Act 16 of 2009; am by s 2(2)(d) of Act 7 of 2017.]

(3) In this section—

(a) “relevant turnover” in relation to any person or partnership and to any relevant quarter means the aggregate turnover for that relevant quarter of every trade, business, profession or vocation carried on or exercised by such person or partnership, as the case may be, in Sri Lanka whether directly or through an agent or more than one agent:

Provided that, in relation to any relevant quarter commencing on or after April 1, 2012 ending on or before March 31, 2016, where such part of the taxable income as consists of profits from any trade, business, profession or vocation assessed under the provisions of Inland Revenue Act, No. 10 of 2006 for the year of assessment which ended immediately prior to the commencement of the year of assessment to which such quarter belongs, is more than zero, the relevant turnover for such quarter other than any turnover, the profits from which are exempt from income tax shall be deemed to be zero.

[S 2(3)(a) proviso ins by s 2(3)(a) of Act 11 of 2012; am by s 2(1) of Act 6 of 2013; am by s 2(3) of Act 7 of 2017.]

(b) “turnover” in relation to any trade, business, profession or vocation and to any relevant quarter means the total amount receivable, whether actually received or not, from every transaction entered into in that relevant quarter in the course of such trade, business, profession or vocation carried on or exercised by such person or partnership—

(a) after deducting therefrom—

(i) any sum included in such total amount being a sum which represents the value added tax in respect of that transaction, provided that the person or partnership who or which carries on or exercises such trade, business, profession or vocation is at the time of such transaction registered under section 10 of the Value Added Tax Act, No. 14 of 2002;

(ii) any sum included in such total amount being the proceeds from the disposal of any capital asset;

[S 2(3)(b)(a)(ii) am by s 2(2)(b) of Act 16 of 2009.]

(iii) the amount of any bad debt incurred by that trade, business, profession or vocation during that relevant quarter, being an amount which had been included in the relevant turnover of such trade, business, profession or vocation of that or any previous relevant quarter; and

(iv) the proceeds of sale of any foreign currency denominated sovereign bond issued by the Government of Sri Lanka to any licensed commercial bank or to any non-resident person (effective from October 21, 2008);

[S 2(3)(b)(a)(iv) ins by s 2(2)(c) of Act 16 of 2009.]

(v) the proceeds of sale—

(a) of any Treasury Bill issued under the Local Treasury Bills Ordinance; or

(b) of any Treasury Bond issued under the Registered Stocks and Securities Ordinance,

purchased out of the funds drawn from any Treasury Bond Investment External Rupees Account (effective from June 1, 2008);

[S 2(3)(b)(a)(v) ins by s 2(2)(c) of Act 16 of 2009.]

(vi) receipts from the export of any article or goods, effected on or after January 1, 2009 but on or before December 31, 2009;

[S 2(3)(b)(a)(vi) ins by s 2(2)(c) of Act 16 of 2009.]

(vii) receipts from the supply, effected on or after January 1, 2009 but on or before December 31, 2009, by the manufacturer of any article or goods to any exporter for export without further processing or manufacture by the exporter;

[S 2(3)(b)(a)(vii) ins by s 2(2)(c) of Act 16 of 2009.]

(viii) receipts from any operations, effected on or after January 1, 2009 but on or before December 31, 2009, of any—

(a) hotel;

(b) inbound tour operation; or

(c) inbound tour agent,

being a hotel, operator or agent as the case may be, approved by the Sri Lanka Tourism Development Authority established under Tourism Act, No. 38 of 2005;

[S 2(3)(b)(a)(viii) ins by s 2(2)(c) of Act 16 of 2009; am by s 2(3)(b)(i) of Act 11 of 2012.]

(ix) proceeds from the sale of any clay roof tile or prottery product by any manufacturer or such product;

[S 2(3)(b)(a)(ix) ins by s 2(3)(b)(ii) of Act 11 of 2012; am by s 2(2) of Act 6 of 2013.]

(x) funds voted by Parliament from the Consolidated Fund or any loan arranged by the Government of Sri Lanka, for the provision of any service, free of charge by any public corporation on behalf of the Government; and

[S 2(3)(b)(a)(x) ins by s 2(3) of Act 6 of 2013.]

(xi) proceeds from the sale of any organic fertilizer by the manufacturer of such product; and

[S 2(3)(b)(a)(xi) ins by s 2(3) of Act 6 of 2013.]

(b) after adding thereto, any sum received during that relevant quarter on account of any bad debt written off or allowed in any previous quarter:

Provided that—

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