Changes to sales tax exemption have been proposed through Finance Supplementary (Second Amendment) Bill of 2019.
The government has put forth proposed changes to sales tax exemptions across various sectors, as outlined in the Finance Supplementary (Second Amendment) Bill of 2019. PwC A. F. Ferguson Chartered Accountants provided insights into the amendments, highlighting key modifications to the Sixth Schedule of the Sales Tax Act, 1990.
Proposed Changes:
a) Restriction on Exemption for Renewable Energy Items: The government has recommended restricting the exemption on the import or supply of items exclusively dedicated to renewable energy sources, such as solar and wind, up to June 30, 2023. Previously, this exemption had no time restrictions.
b) Limited Exemption for Colostomy Appliances: The proposed amendment restricts the exemption from sales tax on the import or supply of appliances for colostomy. The exemption will be applicable only to those appliances and items required for ostomy procedures as specified in Chapter 99 of the First Schedule to the Customs Act, 1969.
c) Withdrawal of Exemption for Colostomy and Urostomy Bags: The Finance Supplementary Bill suggests withdrawing the exemption from sales tax on the import or supply of colostomy and urostomy bags.
d) New Entry for Plant and Machinery Exemption: The bill introduces a new entry proposing an exemption from sales tax on the import of plant and machinery, excluding consumer durable goods and office equipment. This exemption applies to Greenfield industries engaged in manufacturing taxable goods during their construction and installation period. The eligibility is subject to specific conditions and the issuance of an exemption certificate by the Commissioner Inland Revenue.
e) Limited Exemption for Renewable Energy Project Equipment: The proposed changes restrict the exemption for machinery, equipment, and spares meant for the initial installation, balancing, modernization, replacement, or expansion of projects for power generation through renewable energy sources. This includes solar, wind, micro-hydel, bioenergy, ocean, waste to energy, and hydrogen cell, and is applicable only until June 30, 2023.
f) Time-Limited Exemption for Renewable Energy Systems: The bill suggests restricting the exemption on various systems and items dedicated to renewable energy sources like solar, wind, geothermal, etc., up to June 30, 2023.
These proposed changes indicate a shift in the government’s approach to tax exemptions, introducing time limitations and refining eligibility criteria. PwC A. F. Ferguson Chartered Accountants recommends stakeholders closely monitor these amendments and assess their potential impact on various industries covered by the Sales Tax Act, 1990.
