IRD Notice on ESC 09/05/2017

asked May 9, 2017 in ESC by Visio (4,210 points)
Implementation of Changes to Economic Service Charge (ESC)

The Bill to amend the ESC Act was passed in Parliament on May 3, 2017 together with
subsequent Committee Stage amendments. The changes to the ESC are implemented with
immediate effect (unless a specific date is mentioned). The Bill would become law upon
the certification of the Hon. Speaker.

According to the Bill passed in Parliament together with the Committee Stage amendments,
the significant changes are as follows.
1. Rate
The rate is increased from 0.25% to 0.5% with effect from 01.04.2016
2. Liability
The exclusion of liability to ESC applied to profit making businesses is removed
with effect from 01.04.2016. Accordingly, any business of which turnover reaches
the threshold is liable for ESC, irrespective of profitability in the preceding year.
3. Removal of upper ceiling of ESC Payment
The maximum liability of ESC Rs.120 Mn per year is removed with effect from
01.04.2016. Accordingly, liability arises without any upper limit.
4. The period for setting off of ESC
The period for setting off of ESC against income tax payable for any period
commencing from April 1, 2016, is reduced from 5 years to 3 years.
5. Threshold
The present threshold is reduced from Rs 50 Mn to Rs 12.5 Mn. per quarter with
effect from 01.04.2017
6. ESC on Petroleum Retailers (Filling Station)
- Retail sale of petrol, diesel or kerosene is liable for ESC if the aggregate turnover
including other lubricants for any quarter reaches the threshold. I.e. Rs.50 Mn
(01.04.2016) or Rs. 12.5 Mn (01.04.2017).
- Tax shall be calculated on 1/10th of the relevant turnover of petrol, diesel or
kerosene with effect from 01.04.2016 and other Lubricants are liable on the
actual turnover.
7. Advance ESC
ESC is charged in advance on the CIF value certified by the Director-General of
Customs, of an importer (disregarding the threshold for ESC liability), in respect of
every consignment of imports of:-
- any article subject to Special Commodity Levy (SCL), with effect from 01.04.2016.
- gold, precious metals with effect 24.11.2016.
- motor vehicles with effect from 01.04.2017.
The advance payment of ESC could be set off against the actual liability of ESC for
the same year of assessment and not entitle for any refund.
8. Re defining the “Person”.
The Central Bank of Sri Lanka is redefined as a person for the purpose of ESC and
liable for ESC with effect from 01.04.2017.
Any person or partnership who/which failed to pay due amount of ESC due to insufficient
legislative arrangements is required to pay the charge immediately and to avoid any possible
legal action.


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