Inland Revenue clarifies the Issues of VAT Invoicing

The department of Inland Revenue has clarified that there is no requirement or obligation to issue a VAT invoice for the retail customers who are not registered for VAT. According to them, VAT Registered establishments are only obliged to provide a VAT invoice with breakdown only if there is a request made by a VAT registered person or business entity for claiming input VAT.

According to further explanations from IRD, the customer should necessarily have a VAT registration to get a VAT invoice from the Goods or service provider. So VAT registered person can issue two types of invoices.

• VAT invoice showing the breakdown of goods or service amount with the VAT amount charges
• Normal Invoice without showing VAT amount separately. Therefore, the amount displayed will be the VAT inclusive amount charged.

However, it is mandatory to display the VAT registration certificate publicly by VAT registered entities.

It was noted that there is no increase in new VAT registrations despite the recent changes to VAT thresholds and removal of exemptions. The VAT threshold for businesses were reduced to an annual turnover of Rs. 60 million from Rs. 80 million. Government expected to generate an annual tax revenue of 1400 billion rupees by reducing threshold, increasing VAT rate and the removal of exemptions to VAT.