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Economic Service Charge proposed changes of 2017 budget - Effective from 1 April 2017 ?
01/03/2017
In a newspaper advertisement on January 16, the Inland Revenue Department (IRD) directed that final date of payment for the ESC for the quarter ending December 31, 2016 is January 20 (Friday). Taxpayers were told to pay before January 20 as this day has been declared a half holiday for banks.
The notice said ESC ‘is payable as proposed in Budget 2016 and passed by parliament’.
However just like last year’s fiasco when the Supreme Court ordered that the VAT cannot be enforced until a proper gazette notification is issued, enforcing the ESC through a press notice is illegal, accountants say.
Even in April 2016, a press notice was issued by the IRD on the ESC charge but unlike the similar notices issued for VAT and NBT which were struck down by the Courts, there was no challenge mounted against the ESC press notice. As a result, some companies have been paying the rate.
The April notice was based on the 2016 budget presented in November 2015 with the tax proposals to take effect from April 2016.
Under the existing ESC amendments, the ESC rate is 0.25 per cent. Only loss making institutions and companies under income tax holiday are liable to pay ESC. Also as per the present law there is a ceiling on the total ESC payable which is Rs. 120 million per year.
Economic Service Charge proposed changes of 2017 budget
01/12/2016
Proposals in the Budget 2016, subject to modifications, will be given effect together with the
Budget Proposals 2017. Followings were proposals submitted and effective from 1 April 2017,
* ESC rate to be increased from 0.25% to 0.5%
* Period for carry forward of ESC to set off against income tax liability reduced from 5 year to 2 years
* Present exclusion of profit making business from chargeability to ESC will be removed
* Retail trade in petrol, diesel and kerosene will be charged ESC, provided the aggregate turnover
for a quarter is LKR50Mn or more. Tax shall be calculated on 10% of the liable turnover of such
trade.
* ESC will be charged, in advance, by the CGIR from the importers of goods subject to SCL, on the
CIF value of such imported goods, upon clearance of such goods from the Sri Lanka Customs,
irrespective of the ESC threshold.
The advance payment of ESC could be set off against the actual liability of ESC for the same year
of assessment but no refund will be made