– Association says ongoing projects should be exempt from VAT
– Welcomes 30% reduction of Cess but benefit marginal for projects nearing completion
The Condominium Developers Association of Sri Lanka (CDASL) is lobbying for ongoing projects to be granted an exemption from the newly introduced output Value Added Tax (VAT) on apartment sales.
Speaking to The Sunday Morning Business, CDASL Chairman Pradeep Moraes stated that many of the ongoing big projects in the country have neared the completion of construction work and imposing VAT on these apartments is unreasonable.
“Projects for which permits have been obtained already and work is ongoing should be exempt from output VAT as all their contracts and pricing has been based on previously existing tariffs. Each development will be affected in different degrees depending on how much they have spent on the project and how much inventory is left.”
Under the Budget 2019, 15% VAT has been imposed on apartment sales with effect from 1 April 2019.
“All the agreements that have been signed will continue to be exempt from output VAT. We have contracted with the clients also on the basis of certain conditions.”
Speaking further, he stated that providing a 30% cess reduction on imported construction material is most welcome but this would be of marginal benefit for developers who are nearing completion.
“Altair has spent more than 85% of the total project cost and there is 30% inventory to be sold. Therefore there is a disproportionate percentage of VAT that cannot be claimed and many other developers are in the same predicament,” said Moraes, who is also Director of Altair.
Meanwhile, speaking to The Sunday Morning Business, Sector Head of the Property Group at John Keells Holdings Nayana Mawilmada stated that even Cinnamon Life has completed most of its structural work and would therefore not benefit significantly from the cess reduction. 93% of construction work at Cinnamon Life has been completed while as at early March, 64% of its apartments were sold.
In another measure to offset the negative impact of the VAT impositions, the Budget 2019 also proposed the granting of residential visas for three years to foreign nationals who invest Rs. 70 million or more in condominiums. This process will be implemented this year. However, this residential visa will not be valid when the foreigner exits from this investment.