Govt. exempts cess tax on projects above US$ 50mn investment

The Cabinet of Ministers has decided to exempt the cess tax charged on imports for projects or companies with an investment value of US$ 50 million or above as part of the government’s myriad measures to incentivise investments into the country. 

The exemption will apply on, “any good imported”, and “any project”, which became operational on or after March 6, 2019 but prior to the commencement of commercial activities of the project. 

The Cabinet decision said there are no provisions currently for the exemption of cess for projects as there are some large-scale projects which will commence commercial operations in stages before completion of the entire project. 

To this end, a gazette notification has already been published under the Sri Lanka Export Development Act No.40 of 1979, allowing provisions for the exemption of such projects from the need to pay cess. 

The investment or project companies are required to import various items to build the necessary infrastructure required for the project such as construction materials and machinery paying a cess before commencing their intended commercial operations. 

But according to this decision, cess will not have to be paid if the project investment is US$ 50 million or more. 
The cabinet decision doesn’t clearly say whether the companies can recover the cess already paid after March 6, 2019. Companies may also be able to offset cess which they will have to pay once they start their commercial operations against what they have already paid. 

Sri Lanka in April brought a Bill providing sweeping concessions and incentives to those who seek investments in the Colombo Port City, which will also be exempted from existing multiple laws in the mainland to free investors from difficulties they have to undergo, but a debate and a vote on the Bill earlier scheduled for last week was postponed due to brief parliamentary sessions caused by the current virus wave.

The Sri Lankan government is walking on a tightrope by having to keep its economy in tact while battling a virus amid a growing chorus of calls for complete shutdown of the country.