We are in the business of distribution. how to calculate nbt and Vat on invoice?

asked Apr 2, 2015 in NBT by Niroshan

1 Answer

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answered Apr 2, 2015 by Visio (4,530 points)
Goods and passenger transport is excepted from NBT. However if you are using third party vehicles to provide services this exemption would not be applicable. However if you are VAT registered you will be required to collect VAT from the customer at the prescribed rate (currently 11%). However whether you charge NBT from the customer or not needs to be decided by you. Unlike VAT, NBT act is silent as to you should collect NBT from your customer or not. Therefore you have the option to charge or not. Similarly your customer can refuse to accept NBT. Therefore it is more likely to be decided by the bargaining power of the parties.

Further if even if you decide to charge NBT, you need to decide you are going to recover full NBT payable  (including the cascading effect) from the customer. For example if your invoice value is Rs 100/- then you may charge NBT @ 2%. Then invoice value before VAT is 102. VAT will be 11.2/- and total value will be 113.2/-. However you will have to pay 2% NBT to Inland Revenue for any amount charge above VAT. That means you will have to pay 102x2%=2.04/- to inland revenue. So you are paying more NBT than you collect from the customer.

However you may have the option to recover from the customer NBT in full. In this case you have to charge 2/98 from the value of the invoice. For instance if you charge 2/98 from above customer you would have charged 2.04 as NBT which the the same as the payable.

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