Sunday, 22 November 2015

Key Budget proposals (2016) applicable to Construction Industry.

·         It was proposed the construction companies who seek overseas markets to be granted the opportunity to continue with the tax exemption on the income generated outside Sri Lanka.

·         Any foreign contractor entering Sri Lanka to undertake construction work should enter into a joint venture agreement with a local contractor.

·         It was proposed to remove the Construction Industry Guarantee Fund Levy (CIGFL). ([Amendment to PART III of the Finance Act No. 5 of 2005, CIGFL will be removed with effect from January 1, 2016)

·         The proposed National Housing Bank will provide the necessary guarantees together with a dedicated and focused operation that will support the construction industry.

·         It was proposed to introduce a Payment Guarantee Security Act which will provide adequate cover in recovering their payments.

·         To encourage private sector to import machinery necessary for purifying sea sand in the deep sea, which could be used for construction, it was proposed cost of such imports be considered as a double deduction, for tax purpose.

·         To address the short supply and high prices of building materials such as steel, tiles and sanitary ware, import related duties will be revised downwards. It was proposed to remove tiles, ceramic, and sanitary ware, from the negative list of the BOI.

·         The import duties on cranes and concrete mixers will be removed.

·         Also the age limit applicable for imports of heavy equipment machinery used in the construction industry will be extended to 10 years from the present 7 years.

·         It was proposed to increase the mobilization advance granted to small and medium scale contractors for government contracts of a value of less than Rs. 50 million to 30% with the objective of improving their cash flows.

·         It was proposed to introduce a PPP program with the private sector for practical training  and an allowance of Rs 10,000 will be paid monthly to the trainees by the government during the training period limited to 3 months. It is envisaged that at least 7,500 youth will be trained in masonry, carpentry, plumbing, electrical, aluminium extrusion etc. on a quarterly basis. I propose to allocate Rs. 500 million for this purpose.

·         It was proposed to increase the PAL from 5 percent to 7.5 percent, other than plant and machineries used for construction, dairy and agricultural industries which will be exempted.

·         The present single VAT rate will be revised to 3 bands 0%, standard rate of 8% and 12.5% higher rate for service sector and the minimum threshold for the liability for VAT will be Rs.12 million per annum.


  1. National Housing bank to provide guarantees to industry???

    Currently ‘Construction Guarantee fund’ provides guarantee, then why the government has proposed another one? Any idea?

  2. ya.they need to a lot of document for issue a bond.and also every payment coming on them through.but their rate is lower than other bank etc,


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