Economic Service Charge (ESC)

Economic Service Charge (ESC) has been administered since 1st of April 2006 under the Economic Service Charge (ESC) Act No. 13 of 2006, as amended by Economic Service Charge Amendment Acts No. 15 of 2007, 11 of 2008 and 16 of 2009. prior to this, it has been administered under Finance Acts 11 of 2004 and 11 of 2005 from 01.04.2004 up to 01.04.2006. ESC is allowed to be deducted from the income tax payable in that year of assessment and any ESC which cannot be so deducted is carried forward and deducted from the income tax payable, to the extent that it could be deducted in the succeeding four years of assessments. ESC thus operates as an advance payment of income tax in respect of any person whose liability to income tax exceeds the ESC liability and such person bears no burden of the ESC. A person whose contribution to income tax do not exceed ESC liability, for instance in the case of a loss making business, ESC has to be paid and no deductions can be effected elsewhere.

Consolidated Text of the Economic Service Charge Act No.13 of 2006 [ | | ]

Economic Service Charge Act No.13 of 2006 [ | | ]
[Certified 31st March 2006]

Economic Service Charge (Amendment) Act No.15 of 2007 [ | | ]
[Certified 12th April 2007]

Economic Service Charge (Amendment) Act No.11 of 2008 [ | | ]
[ Certified 29th February 2008 ]

Economic Service Charge (Amendment) Act No.16 of 2009 [ | | ]
[Certified 31st March 2009]

Tax Liability
Every person or partnership which carries on a trade, business, profession or vocation except Cooperative Societies, non resident aviation and shipping companies, local Government bodies and Government Departments will have to pay Economic Service Charge whether such person or partnership liable to pay income tax or not.

Base
Should register for ESC if the turnover of a quarter is Rs. 7.5 million or more. The maximum economic service charge to be paid for a quarter is limited to
              Rs. 15 million - up to 31/03/2009
              Rs. 30 million - from 01/04/2009
Even if the tax payable by you for the relevant quarter exceeds rs. 30 million as per your turnover, you will have to pay only Rs. 30 million.

Grace Period
A grace period of 36 months from the commencement of the business in respect of manufacturers was there from 1/4/2007 to 31/3/2009. Accordingly, during that period the turnover was not liable even if the turnover exceeded the above limits. However, this was removed from 1/4/2009.

Turnover
The amount due from every transaction whether actually received or not. But following are not included to the liable turnover.
               VAT
               Proceeds from sale of capital assets.
               Bad debts
For the period from 01/01/2009 to 31/12/2009 the following receipts are also not to be included to the liable turnover.
               Receipts from export of goods.
               Receipt from supply of goods by manufactures to exporters for export.
               Receipts from the operating of Tourist Hotels approved by the Tourist Development Authority of Sri Lanka.

Set off of Tax
ESC paid can be set off against the Income Tax payable for the relevant year of assessment. A balance, if any can be brough forward and set against the 4 subsequent years of assessments.

Returns
Return of ESC should be furnished on or before 20th day of the month immediately succeeding the end of that relevant quarter.

1st Quarter - April - June       - Prior to 20th July
2nd Quarter - July - September               - Prior to 20th October
3rd Quarter -   October - December     - Prior to 20th January
4th Quarter -   January - March - Prior to 20th April

Returns should be submitted to
Relevant Branch

Payment of Tax
ESC is payable on self assessment basis in four quarter. Payments should be made using the specific form and the period of tax should be correctly indicated.
(Ex. 30/06/2009 quarter 09101)

1st Quarter - on or before the 20th July

2st Quarter - on or before the 20th October

3st Quarter - on or before the 20th January

4st Quarter - on or before the 20th April

Download

ESC Manual
ESC Guide

More Details

Tax Payer Service Unit - 2328702
Secretariat Unit - 2338635