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Budget at a glance

Abolished

Goods and Service Tax (GST)

National Security Levy (NSL)

Corporate Tax Surcharge of 20 per cent

Advance Company Taxation

Tax on Capital Gains

Governmental Stamp Duty

100 per cent grant per tax

Introduced

VAT (Value Added Tax) from June 1, 2002 the date on which the GST and NSL will be abolished.

This will be a two-rate tax system Lower band (10 %) will apply to essential services and goods, which include power, petroleum, essential food stuffs, fertilizer, pharmaceuticals and medical equipment, industrial equipment, agricultural and fishing equipment.

A standard rate of 20 per cent for other goods and services will be introduced.

A Tariff Commission will be set up.

Custom Duties

Surcharge on import duty to be reduced from 40 to 20 per cent on April 15, 2002. It will be totally abolished in the beginning of 2003 High specific duties and import licenses will be replaced by a rate of protection for the main agricultural goods (rice, chilies, onions, potatoes and edible oil) equal to about 60 per cent of the landed cost of imports.

Import duty reduced on selected raw materials and in line with provisions with the Indo- Sri Lanka Trade Agreement.

Depreciation for used motorcars of more than two and half years of age and other vehicles more than four years old will be reduced by 2.5 per cent.

Duties surcharges and other levies for Parcel Post imports worth less than Rs.10,000 will be abolished.

Debit Tax and Airport Development Levy a temporary Debit Tax at a rate of 0.1 per cent on debits including cheque, credit cards, travelers' cheques, drafts and bank debit card systems in financial institutions including banks will be introduced on May 1, 2002.

Stamp duty on imports will be converted to a Port and Airport Development Levy on May 1, 2002.

Governmental Stamp Duty will be abolished on April 30, 2002

Excise Taxes

Excise tax reforms will come into effect from March 23, 2002

Power and Energy

The importation and supply of petroleum will be liberalized and opened to the private sector.

Betting and Gaming

The Betting and Gaming Levy Act will be amended

Direct Taxes

Personnel income tax structure will be changed. By 2004 the top rate of personnel income tax will be reduced to 20 per cent. In the 2003 Budget it will reduced to 25 per cent. This year the marginal rate of tax will be changed from 10 %, 15 %, 25 % and 35% to 10 %, 20% and 35 %. The tax exemption threshold will be raised from the present level of Rs.144, 000 per annum to Rs.240, 000 per annum. This will come into effect April 1,2002 as follows.

For taxable income of first Rs. 180,000 the tax rate is 10 per cent For the next Rs.180, 000 it will be 20 per cent. For the balance it will be 35 per cent.

Retirement Benefits

Tax exemption threshold for retiring benefits will be raised from Rs.500, 000 to Rs.1, 000,000. Next Rs. 500,000 will be taxed at 5 per cent. The next Rs.500, 000 will be taxed at 10 per cent and the balance at 15 per cent. It will come into effect on April 1, 2002.

Corporate Taxation

Companies will be divided in to two categories for Corporate Taxation. The line of division will be a taxable income of Rs.5 million. For both categories the present surcharge of 20 per cent will end on March 31, 2002.

From the beginning of 2003 the top rate of Corporate Taxation will be reduced to 30 per cent. For 2004 it will be reduced to 20 per cent, which will be the maximum rate thereafter. From April 1,2002 Companies with the taxable income of less than Rs.5 million will be taxed at 20 per cent.

Tax on interest

Interest earned will be excluded from computation of assessable income. The tax rate will be only 10 per cent. Interest income of Rs.600, 000 or less per deposits per annum will not be liable to this tax.

Tax on Dividends

Income tax will be restricted to 10 per cent from April 1, 2002

Government Sector Incentives

Fabric duty will be exempted from April 1, 2002 Duty free allowance to migrant workers from April 1, 2002 the duty free allowance for this category of employed abroad will be increased from US $ 1250 to US $1500 for those who work overseas over for one year.

Pension Reforms

In all future public offices will contribute 8 per cent of their salaries to a contributory pension and Government will contribute 12 per cent and salaries will be adjusted accordingly. 

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