Tax changes in the 2019 Budget

Colombo (News 1st): Sri Lanka has hiked taxes on cigarettes, international credit card transactions, and gambling, but will phase out para tariffs on imports, Finance Minister Mangala Samaraweera said while delivering the 2019 budget.

1. Tobacco & Liquor

A Nation Building Tax (NBT) will be levied on cigarette production from June 01. Accordingly, excise duty on cigarettes, which are more than 60 mm, will be increased by 12%, resulting in an increase of Rs.5 per stick on average. Revision of cess duty on the importation of Tendu Leaves (Beedie Leaves) from Rs. 2,500 to Rs. 3,500 per Kg, effective from March 6th 2019. Excise duties on locally manufactured alcohol will increase annually, based on inflation and growth indices, Samaraweera said. Increase of excise duty on hard liquor manufactured locally by 08% (Excise duty on Special Arrack remains without change) and malt 46 liquor by 12% will be done based on indexation effective from March 06, 2019 where the minimum annual duty increase is according to an index capturing annual inflation and income growth (GDP change).

2. Food & Beverages

The sugar tax has been revised. The exempt quantum of sugar contained in beverages will be revised as 4 grams per 100 ml in carbonated beverages and 8 grams per 100 ml in fruit-based beverages. The duty rate will be revised to 40 cents per gram of sugar in excess of the exempt quantity.

3. Vehicles & Transport

Higher vehicle excise duties have been slapped, with small vehicles such as a Wagon R getting a 20% increase. The tax rate applicable to electric cars was brought down from Rs. 12,500 a kilowatt to Rs. 10,000. Taxes on “buddy” trucks with a cargo capacity of less than 2,000 kilos was brought down, but it was not clear by how much. Trucks are also due to be taxed at an unspecified lower rate. Vehicle tax changes are expected to bring in Rs. 48 billion in additional revenue to the state. Tolls will be increased by Rs 100 on expressways during peak hours effective April 1st 2019. Revision of the price of special number plates for motor vehicles, issued by the Department of Motor Traffic will be effective from June 1st 2019. Embarkation levy will be increased by US$ 10 to US$ 60 per passenger. This increased embarkation fee shall be credited to the Consolidated Fund effective April 1st 2019. Revision of fee on alteration of passports and issuance of passports effective April 1st 2019. Passport issuance fee has been increased by Rs. 500 to Rs. 1,000 per passport. One day service fee has been increased by 50% to Rs. 15,000 per passport. Normal passport service fee has been increased to Rs. 3,500 from Rs. 3,000 per passport. The embarkation levy and passport fee revision are expected to bring in Rs. 8 billion in 2019.

4. Credit Cards

Introduction of 3.5% of Nation Building Tax (NBT) in place of existing Stamp duty, on all foreign payments made by using any Credit Cards and Debit Cards. This will be made effective from June 1st 2019. Minister Samaraweera noted that this proposal will also help address the taxation of off-shore digital services. Stamp Duty on the usage of credit cards for foreign purchases will be removed in line with the imposition of NBT on foreign payments.

5. Gaming

The increase of license fee of casinos from Rs. 200 mn to Rs. 400 mn per annum and rudjino games to Rs. 1,000,000 per annum. The casino turnover levy will be charged at 15%. These new charges will be effective April 1st 2019

6. Para-tariffs

Para-tariffs on imports will be phased out over five years, while products related to tourism, manufacturing, and construction will be free of para-tariffs over three years. The Port and Airport Levy on boilers, machinery, and electrical items will be cut to 2.5%. Minister Samaraweera noted that the International Telecommunication Operators Levy will be removed. The Treasury is expected to give up Rs. 6 billion in revenue with the removal of para-tariffs. "We will also ensure that 10% of all HS codes, considered to be sensitive items, will not be subject to a complete para-tariff phase-out," Samaraweera said.

7. Customs Import Duty

The rate of the Customs Import Duty on selected goods has been revised. Unit rate of the customs import duty will be increased by 10% on the importation of selected goods. Minister Samaraweera noted that customs duty applicable to imported fruit drinks will be adjusted with effect from June 1, 2019. Customs duty on undenatured ethyl alcohol is due to be increased by Rs. 200 to Rs. 1000 per litre.

8. Tourism

The infusion of technology, especially in facilitating online hotel reservations, has changed the traditional hospitality industry with the informal sector growing and remaining unregulated. Minister Samaraweera noted that whilst they recognize the benefits of online reservation systems, they are mindful of the need to gradually integrate the SME tourism sector into the formal economy. From April 1st 2020, any online booking/reservation website can register hotels and similar establishments offering more than 5 rooms per property, only if such establishments are registered with the Sri Lanka Tourism Development Authority (SLTDA). The registration process of the SLTDA will be further simplified to facilitate this. " At the same time, in keeping with our policy of supporting the industry to diversify into new frontiers, such as sports tourism, I encourage the private sector, together with the SLTDA, to promote Sri Lanka as a preferred destination in International Go Kart Racing," said Minister Samaraweera. The Minister proposed to remove customs import duty (CID) and cess on Go Karts and the tires used in Go Karts.

9. Property Development

Residential visas for 3 years to foreign nationals who invest US$ 400,000/= or more in condominiums. This process will be implemented this year. This residential visa will not be valid when the foreigner exits from this investment. Cess on imported construction material will be reduced by 30%.