The Economic Service Charge (ESC) installment payable for the quarter ended 30
June 2016 (i.e., first quarter of the year of assessment 2016/2017) is due to be made
on or before 20 July 2016. The ascertainment of this installment needs to be based on the proposed amendments to the ESC Act, No.13 of 2006, as announced in the Budget 2016 and notified subsequently in the respective websites of the Ministry of Finance and the Department of Inland Revenue. According to these notices the amendments are to be made effective from 1 April 2016, subject to enactment.
The proposed amendments are as given below:
1. Rate increased
The rate of ESC has been increased to 0.50% from 0.25%.
2. ESC payable irrespective of loss or exemption ESC will be payable based on the relevant
turnover of the business for the year of assessment concerned, irrespective of whether
the business has no taxable income in the immediately preceding year or is entitled to
enjoy income tax exemption in the year concerned.
3. Ceiling of liability removed
There will be no ceiling on the ESC payable for a year. Prior to 1 April 2016, the maximum
liability had been Rs.120 million per year. 4. Petrol, diesel and kerosene – Only a
percentage of turnover made liable With regard to retail trade of petrol, diesel and
kerosene, the liability to ESC arises if the aggregate turnover of the respective business
exceeds the normal threshold (i.e. Rs. 50 million for a quarter) but, the computation of
ESC thereon will be only on 1/10th of the relevant turnover of the business.
5. Carrying forward of ESC limited to two years
Effective from the year of assessment commencing from 1 April 2016, any unabsorbed ESC can be carried forward and set off against the income tax payable for the immediately following two years of assessment
However, with regard to any unabsorbed ESC paid for any year of assessment commencing
prior to 1 April 2016 can be carried forward up to four years of assessment from the end of
such year and deducted in terms of the earlier provisions.
6. Import point ESC
As regard the items of goods liable to Special Commodity Levy at the point of import, ESC will
be payable as a withholding tax to the Commissioner General of Inland Revenue
(CGIR), before the goods are cleared from the Customs, on the CIF value of such goods
imported computing at the rate of 0.50% irrespective of the threshold for ESC liability.
Such ESC paid in advance can be set off against the actual liability of ESC for the same year of
assessment, but not entitled for any refund.