Salient features of Social Security Contribution Levy and it's exemptions-26.09.2022

Effective Date :The Social Security Contribution Levy shall come into operation on the First day of October  2022.

Persons to whom this Act applies : Importers, Manufacturers,Service providers and Wholesalers and Retailers

Registration Requirement : 

• Not later than 15 days from the date of operation of this Act, in the case of a taxable person whose aggregate of the turnover, within the 12 months period immediately prior to the date of operation of this Act, exceeded 120Mn rupees;
• Not later than 15 days from the date on which the aggregate of the turnover for a quarter exceeds or is likely to exceed 30Mn rupees, in the case of a taxable person 

Rate :2.5% on liable turnover 

Liable Turnover :

Accounting basis : Every registered person shall account for levy on an accrual basis

Payment :  Pay the levy payable by such person on or before the 20th day of the immediately succeeding month of the relevant month of that quarter to the Commissioner-General, in such manner as may be specified by him.

Ex : SSCL for the month of October 2022 should be paid on or before 20th November 2022.

Return to be furnished :Every registered person shall furnish to the Commissioner-General a return either in writing or by electronic means for every quarter on or before the 20th of the month after the end of each relevant quarter. Every such return shall be in the form specified by the Commissioner-General.

Ex : SSCL Return for the Quarter ended 31st December 2022 is due on 20th January 2022

Penalty for Default payment 

• Where the amount of default is not paid before the last day of the succeeding month, 10% of the amount in default; and a further sum equivalent to 2% for each period ending on last day of succeeding month / part of such period during which it is in default.The total amount payable as penalty shall not exceed 100% of the levy in default

Penalty for Non- Compliance with the Return

• Failure to apply for registration within the due period - Penalty of a sum not exceeding Rs. 25,000
• Penalty of a sum not exceeding LKR 50,000

Exemptions on Importation 

• Any article which is imported, is proved to the satisfaction of the Commissioner- General, that such article is imported to Sri Lanka for–
  (a) the display at an exhibition;
  (b) the temporary use in Sri Lanka in any project approved by the Minister;
  (c) the purposes of repairs to that article to be carried out in Sri Lanka;
  (d) any other similar purpose, and is to be re-shipped, within a period of one year from the date of importation of such article to Sri Lanka or within a period of ninety days after the completion of such project; or
  (e) producing any cinematographic film or teledrama in Sri Lanka and taking out of Sri Lanka for further processing or printing with the approval of the National Film Corporation
• Any article imported, if proved to the satisfaction of the Director-General of Customs, that such article was, prior to its importation, taken out of Sri Lanka for repairs
• Any spare part imported by any airline or shipping company, if proved to the satisfaction of the Commissioner-General, that such spare part is to be used for the maintenance of any aircraft or ship, used in international traffic and owned or chartered by such airline or shipping company.
  
• Any article imported if such article is subject to the Special Commodity Levy charged under the Special Commodity Levy Act, No. 48 of 2007
• Fertilizer
• Petroleum and petroleum products other than lubricants classified under Harmonized Commodity Description and Coding Numbers for Customs purpose
• L.P. Gas
• Pharmaceuticals identified under Harmonized Commodity Description and Coding Numbers for Customs purpose
• Tea supplied by the Manufacturer being a manufacturer registered with the Sri Lanka Tea Board established by the Sri Lanka Tea Board Law, No. 14 of 1975, to any registered broker for sale at the Colombo Tea Auctions
• Any article for the use in any project approved by the relevant Minister and by the Minister in charge of the subject of Finance taking into consideration the economic benefit to the country and where the tax in respect of such project is borne by the Government;
• Bitumen classified under HS Code No. 2714
• Raw materials or packing materials imported for the manufacture of pharmaceuticals subject to the approval of the relevant authority
• Plant, machinery or equipment imported on temporary basis for the use of large-scale infrastructure development projects approved by the Minister in charge of the subject of Finance as being of beneficial for the economic development of Sri Lanka, on condition that goods will be re-exported after the completion of work
• Foreign currency notes imported, being notes classified under HS Codes 4907.00.90
• Raw materials or packing materials imported for the manufacture of ayurvedic preparations which belong to the Ayurveda Pharmacopoeia or ayurveda preparation subject to the approval of the relevant authority
• Pure-bred breeding animals under HS 0102.10 or HS 0104.20.10, milking machines under HS 8434.10, dairy machinery under HS 8434. 20 and spare parts under HS 8434.90, at the point of importation
• Bitumen classified under HS Code No. 2714
• Solar panel modules, accessories or solar home systems for the generation of solar power energy classified under Harmonized Commodity Description and Coding Numbers for Customs purposes at the point of importation
• Coal
• Any article manufactured by a company identified as a Strategic Development Project in terms of subsection (4) of section 3 of the Strategic Development Project Act, No. 14 of 2008 sold to another Strategic Development Project or to a specialized project approved by the Minister of Finance or to a company registered with Board of Investment of Sri Lanka established under the Board of Investment Law, No. 4 of 1978, so far as such articles are considered as import replacement and supplied during the project implementation period
• Any machinery or equipment imported or purchased locally for the purpose of generating electricity by the Ceylon Electricity Board established under the Ceylon Electricity Board Act, No. 17 of 1969 or any institution which has entered into an agreement with the Ceylon Electricity Board to supply electricity, being machinery or equipment classified under Harmonized Commodity Description and Coding Numbers for Customs purposes and approved by the Minister of Finance

Exemption for Manufacturers 

• Any article exported by the manufacturer;
• Any article not being a plant, machinery or fixture imported by any person exclusively for the use in, or for, the manufacture of any article for export
• Any article sold by a taxable person to any exporter, if the Commissioner-General is satisfied on the production of any documentary evidence that such article or any other article manufactured, of which such article is a constituent part, has in fact been exported from Sri Lanka by such exporter directly or through a trading house established for export purposes
• Fertilizer
• Petroleum and petroleum products other than lubricants classified under Harmonized Commodity Description and Coding Numbers for Customs purpose
• L.P. Gas
• Pharmaceuticals identified under Harmonized Commodity Description and Coding Numbers for Customs purpose
• Tea supplied by the Manufacturer being a manufacturer registered with the Sri Lanka Tea Board established by the Sri Lanka Tea Board Law, No. 14 of 1975, to any registered broker for sale at the Colombo Tea Auctions
• Any article for the use in any project approved by the relevant Minister and by the Minister in charge of the subject of Finance taking into consideration the economic benefit to the country and where the tax in respect of such project is borne by the Government;
  
• Raw materials or packing materials imported for the manufacture of pharmaceuticals subject to the approval of the relevant authority
• Plant, machinery or equipment imported on temporary basis for the use of large-scale infrastructure development projects approved by the Minister in charge of the subject of Finance as being of beneficial for the economic development of Sri Lanka, on condition that goods will be re-exported after the completion of work
• Any article sold, to the United Nations Organization or to any specialized agency of such organization or to the diplomatic mission of any foreign Government or to any member of the diplomatic staff of such mission or to any other person approved by the Minister on the recommendation of the Minister of Foreign Affairs as being of the status of a diplomatic mission

Exempted Services 

• Generation of electricity and supply of electricity other than the supply of electricity by Ceylon Electricity Board established under the Ceylon Electricity Board Act, No. 17 of 1969
• Medical services;
• Supply of water;
• Transportation of goods and passengers;
• Services provided to any exporter of any article, being services directly related to improving the quality and character of such article;
• Services of sewing garments provided to any exporter of such garments;
• Services of a freight forwarder and a shipping agent licensed under the Licensing of Shipping Agents, Freight Forwarders, Non Vessel Operating Common Carriers, and Container Operators Act, No. 10 of 1972 or courier services in so far as such services are in respect of the exporter of any article from Sri Lanka
• Services provided by a public corporation, in so far as such services are in respect of the exportation of any article from Sri Lanka
• Services of an auctioneer, broker, insurance agent or commission agent of any local product to the extent of the brokerage receivable by such auctioneer or broker, or commission receivable by such insurance agent or commission agent, as the case may be;
• Services of–
  (a) a travel agent in respect of inbound tours operated; or
  (b) a hotel, guest house, restaurant or other similar businesses, where the payment for such services is received in foreign currency through a bank and such agent, hotel, guest house, restaurant or other similar business is registered with the Sri Lanka Tourism Development Authority;
• Client support services provided over the internet, telephone or by an enterprise, exclusively for the provision of such services, to one or more identified clients outside Sri Lanka, for payment in foreign currency
• The business of life insurance
• Distribution, production and supply of any cinematographic films primarily for exhibition in cinemas;
• Exhibiting films in a cinema;
• Any service provided to the United Nations Organization or to any specialized agency of such organization or to the diplomatic mission of any foreign Government or to any member of the diplomatic staff of such mission or to any other person approved by the Minister on the recommendation of the Minister of Foreign Affairs as being of the status of a diplomatic mission
• Any service rendered in or outside Sri Lanka to any person or partnership outside Sri Lanka for the utilization out of Sri Lanka for payment in foreign currency, if such foreign currency is remitted to Sri Lanka through a bank
• Services provided to any specific project carried on, out of foreign funds or donations received by the Government, as approved by the Minister considering the economic benefit to the country
• Any service provided by the Central Bank of Sri Lanka established under the Monetary Law Act (Chapter 422);
• Any service provided free of charge by any public corporation out of the funds voted by Parliament from the Consolidated Fund or out of any loan arranged through the Government, on behalf of the Government
• Services provided by any Government Department, Ministry or any Local Authority
• Services provided by foreign consultancies for the large-scale infrastructure development projects being projects which have been approved by the Minister of Finance, as beneficial for the economic development of Sri Lanka
• Services provided in relation to ship building for the international market for payments made in foreign currency; and
• Any service provided by the Employee’s Trust Fund, Provident Fund, Pension Fund, Pension Trust Fund and Gratuity Fund.

Exempted articles for wholesale or retail sale  in Sri Lanka

• Pharmaceuticals 
• Any article which is subject to the Special Commodity Levy under the provisions of the Special Commodity Levy Act, No. 48 of 2007, where such article is sold by the importer of such article without any processing except for adaption for sale
• any article exported
• petrol, diesel or kerosene sold in a filling station
• L.P. Gas
• fresh milk, green leaf, cinnamon or rubber (latex, crepe or sheet rubber) purchased from any local manufacturer or local producer