IRD to clamp down on errant traders

Pic by Nisal Baduge

By Sandun A Jayasekera.

The Inland Revenue Department (IRD) has found that a large number of traders, business establishments and bakeries do not pass the VAT reduction benefits to the consumers

The IRD would round up errant commercial establishments with the assistance of the Consumer Affairs Authority (VAA),Commissioner General of the IRD Nadun Guruge said yesterday.  
He said the IRD did not have provisions to take legal action directly against commercial ventures who fail to reduce their prices following the recent tax cuts but the CAA has been empowered to do so. The island wide raids on errant trader will commence from the last week of this month.   

“We have found that a fair number of traders and business establishments have failed to pass the benefits of tax cuts to the consumer and they have only used the tax reduction to enhance their profit margin,” Mr. Guruge said.   He said the VAT rate has been reduced to 8% from 15% with effect from December 01, 2019. The liable threshold for registration of VAT has been increased to 75 million rupees per quarter or 300 million rupees per annum from January 01, 2020.   

 Nation Building Tax (NBT) has been abolished from December 01, 2019 tax free limit of the PAYE tax has been increased from Rs. 100,000 to Rs.250,000 per month from January 1, 2020.  

“Amount exceeding tax free limit is liable for PAYE tax at the progressive rate of 6%, 12% and 18% on the monthly tax slab of Rs. 250,000,” he added. 

 
The maximum tax rate has been reduced to 18% from 24%. As such, the progressive rate applicable on personal income is revised to 6%, 12% and 18% and the tax free limit and the tax slab is revised to Rs.3 million per annum, with effect from January 1,2020.   

Payments subject to maximum of Rs.100,000 per month or Rs. 1.2 million per annum will be deductible, calculating the Personal Income Tax, with effect from April 1,2019. Health expenditure including contributions to medical insurance, educational expenditure incurred locally, payment of interest on housing loans, contribution to an approved pension scheme and expenditure incurred for the purchase of equity or security.   The 40% income tax rate is limited to the manufacture and sale or import and sale of any liquor or tobacco product, with effect from April 1, 2019. Corporate Income Tax Rate will be revised from April 1, 2020 on exports, tourism, education, medicare, construction and agro processing to 14%. 
PAYE tax will be removed. Income tax rate applicable on terminal benefits is revised from January 1, 2020. The first Rs. 10 Million – exempted, next Rs. 10 Million - 6% and balance - 12%.   

Interest paid up to Rs. 250,000 per month shall be exempted from withholding tax (WHT), with effect from January 1, 2020.   .