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Home :: Types of Taxes :: Economic Service Charge (ESC)
 

Economic Service Charge

Economic Service Charge (ESC) has been administered since 1st of April 2006 under the Economic Service Charge Act No. 13 of 2006, as amended by Economic Service Charge Amendment Acts No. 15 of 2007, 11 of 2008, 16 of 2009, 11 of 2011, 11 of 2012, 06 of 2013, 9 of 2014, 13 of 2015 and 07 of 2017. Prior to the ESC Act, the charge was administered under Finance Acts 11 of 2004 and 11 of 2005 from 01.04.2004 up to 31.03.2006. ​​

Tax Liability

Every person or partnership who/which is carrying on or carrying out a trade, business, profession or vocation, whether such person or partnership is liable to pay income tax or not, is required to pay ESC.

However, Cooperative Societies, non-resident aviation and shipping companies, local Government bodies, Government Departments, any distributor, any dealer in lottery, any unit trust or Mutual fund is not liable for ESC.

Tax Base & Threshold

Every person or partnership should register for ESC if the liable turnover of a quarter is Rs. 50 million or more during the period from 01.04.2011 to 31.03.2017 and Rs. 12.5 million for any quarter commencing on or after 01.04.2017.

ESC Rate

The rate applicable with effect from 01.01.2016 is 0.5% on relevant turnover.

Liable Turnover

The amount due from every transaction whether actually received or not. But following are not included to the liable turnover.

  • VAT​(if registered for VAT)
  • Proceeds from sale of capital assets.
  • Bad debts

However, turnover for certain categories of businesses, the law provides special definition for liable turnover as published by the Extraordinary Gazette No. 1502/10 dated 20.06.2007, 1506/06 dated 18.07.2007 and 1546/9 dated 22.04.2008 (consolidating all these Gazette notifications, a new Gazette will be published in near future). Such businesses are appended:

  • Freight Forwarders
  • Gem & Diamond Exporters
  • Exports of Garments or any other manufacturer out of the raw materials imported on NFE basis
  • Sale of Securities held by primary dealers
ESC Liability of Filling Stations

Turnover from sale of petrol, diesel or kerosene of any filling station is liable for ESC with effect from 01.04.2016, if the aggregated liable turnover for any quarter is Rs. 50 million or more during the period from 01.04.2016 to 31.03.2017 and Rs. 12.5 million for any period commencing on or after 01.04.2017.

However, the ESC should be calculated on 1/10th of the relevant turnover of petrol, diesel or kerosene and on whole amount of turnover from other products (lubricants etc) and service charges, if any.

​Payment of Tax

ESC is payable on self-assessment basis in four quarters. Payments should be made using the specific paying-in-slip and the period of tax should be correctly indicated. . (Ex. 30/06/2017 Quarter 17181)

Quarter Payment Date
1st Quarter on or before the 20th July
2nd Quarter on or before the 20th October
3rd Quarter on or before the 20th January
4th Quarter on or before the 20th April
Advance ESC & Set off of Tax

ESC is will be charged in advance at the importation of certain articles by the Customs on the CIF value certified by the Director General of Customs (irrespective of the threshold limit) as follows;

  • with effect from 01.04.2016, on any article subject to Special Commodity Levy,
  • with effect from 24.11.2016, on gold, precious metals,
  • with effect from 01.04.2017, on motor vehicle

ESC paid in advance to the Customs can be credited against the ESC liability of the same quarter where the date of clearance of the particular consignment falls. However, the balance liability of ESC, if any, should be paid on or before the 20th day of the subsequent month of the quarter ends.

ESC paid in advance and self payment for the period commencing on or after 01.04.2016 can be set off against the Income Tax payable for the relevant year of assessment and excess, if any, can be carried forward to set off against the liability of two subsequent years of assessment.

However, the excess, if any, of the ESC paid until for the period ended with 31.03.2016 can be carried forward to set off against the liability of four subsequent years of assessment.

Submission of Returns

Due date :

  • Return of ESC should be furnished annually on or before 20th day of the month immediately succeeding the end of that year of assessment.

 

Submit to :

  • Individual and Partnership ESC Returns should be submitted to the relevant Metropolitan/Regional Office where the Income Tax File is dealt with.
  • All Corporate entity ESC returns should be submitted to the Central Document Management Unit (CDMU)

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Last updated: 26-10-2017