Understanding the new Social Security Contribution Levy (SSCL) in Sri Lanka

A new tax was proposed in the Budget 2022 – The Social Security Contribution Levy(SSCL). Following this, a bill regulating the levy was published in the Gazette on the 21st of June 2022. In early September 2022, the bill was passed in Parliament.

So, what does this bill mean for you? And how can you fulfil your obligations? This guide will help you understand the SSCL and take you through the process of fulfilling your SSCL obligations.

Table of Contents

1. What is a Social Security Contribution Levy (SSCL)?
2. Who has to pay Social Security Contribution Levy (SSCL)?
3. What thresholds does the Social Security Contribution Levy (SSCL) have?
4. How to register for Social Security Contribution Levy (SSCL)?
5. What is the rate of tax for Social Security Contribution Levy (SSCL)?
6. What goods and services are exempted from Social Security Contribution Levy (SSCL)?
7. When to pay Social Security Contribution Levy (SSCL)?
8. Penalties for evading Social Security Contribution Levy (SSCL)
9. Social Security Contribution Levy (SSCL) Returns 
10. Social Security Contribution Levy (SSCL) Glossary

What is a Social Security Contribution Levy (SSCL)?

A Social Security Contribution Levy (SSCL) is a payable tax imposed on importers, manufacturers, service providers, wholesalers, and retailers. This levy was introduced in the Budget 2022 as a means to rebuild the country’s economy.

From the 1st of October 2022, it is required for this levy to be obligated every quarter.

Who has to pay Social Security Contribution Levy (SSCL)?

The following are entitled to register the SSCL:

• All importers of any article 
• Manufacturer of any article
• Providing a service of any description
• Wholesale or retail of any article

What thresholds does the Social Security Contribution Levy (SSCL) have?

• All persons with an aggregate total turnover exceeding LKR 120,000,000 within 12 months prior to the date of the operation of the Act
• All persons with an aggregate total turnover exceeding LKR 30,000,000 within a quarter

Note – The Commissioner General of Inland Revenue (CGIR) has the power to exclude a single isolated transaction when calculating the total turnover.

How to register for Social Security Contribution Levy (SSCL)?

All persons who meet the registration threshold, excluding importers, have to register for SSCL by submitting an application form to the CGIR within 15 days of the date of operation of the Act but not later than 15 days from the date on which it exceeds or is likely to exceed the quarterly registration threshold.

What is the rate of tax for Social Security Contribution Levy (SSCL)?

The rate of tax for SSCL will be 2.5% on the “liable turnover”.

What does  “Liable Turnover” mean?

• Importation of any article – 100% of the turnover
• Manufacture of any article – 85% of the turnover
• Service provider – 100% of the turnover
• Wholesaler and retailer: 
  1. Sale of any article by a registered distributor, this includes all manufacturers and  producers of any goods in Sri Lanka – 25% of the turnover
  2. Wholesale or retail sale, excluding items mentioned under 1., including importation and sale – 50% of the turnover

What goods and services are exempted from Social Security Contribution Levy (SSCL)?

The following goods and services are exempted from Social Security Contribution Levy (SSCL),

Exempt Articles (Goods)

• Any article exported by the manufacturer
• Any article not being a plant, machinery or fixture imported by any person exclusively for the use in, or for, the manufacture of any article for export
• Fertilizer
• Petroleum and petroleum products
• L.P. Gas
• Pharmaceuticals identified under the HS Coding System.
• Any article manufactured by a company identified as a Strategic Development Project (SDP) under the SDP Act No. 14 of 2008 sold to another SDP or to a specialized project approved by the Minister of Finance.
• Fresh milk, green leaf, cinnamon, or rubber purchased from any local manufacturer or local producer

Exempt Services

• Generation and supply of electricity other than the supply of electricity by the Ceylon Electricity Board
• Medical services
• Supply of water
• Transportation of goods and passengers
• The business of life insurance
• Any service provided by the Central Bank of Sri Lanka
• Services provided by any Government Department, Ministry or Local Authority
• Any services provided by the Employee’s Trust Fund, Provident Fund, Pension Fund, Pension Trust Fund and Gratuity Fund

When to pay Social Security Contribution Levy (SSCL)?

SSCL is to be paid in three monthly instalments on a self-assessment basis. The due dates are as follows:

Note – The payment could be made to any branch of Bank of Ceylon and must include the following details in the payslip:

1. Payment Period Code format: (YY/Q/O/M)
   Example: October 2022 – Payment code: 22401
2. Tax Type Code: 32
3. TIN Number

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Penalties for evading Social Security Contribution Levy (SSCL)

• Failure to apply for registration within the deadline – A penalty of an amount not exceeding Rs.25,000
• Failure to furnish Return – A penalty of an amount not exceeding Rs.50,000
• Default of payment – A penalty of 10% plus an additional 2% for each additional month of neglecting payment of the levy will be charged.

Note – By default, the payable amount cannot exceed 100%.

Social Security Contribution Levy (SSCL) Returns

All registered persons must furnish to the CGIR a return. This can be done either in writing or by electronic after every quarter on or before the 20th day of the following month.

Social Security Contribution Levy (SSCL) Glossary

See below relevant definitions discussed above,

• “Person” shall have the same meaning as in the Inland Revenue Act, No. 24 of 2017
• “Quarter” means the period of three months commencing on the first day of January, April, July or October of any year.
• “Manufacture” means any process for–
1. making an article;
2. assembling or joining any article whether by chemical process or otherwise;
3. adapting for sale any article; and
4. packaging, bottling, putting into boxes, cutting into pieces, cleaning, polishing, wrapping, labelling, or in any other way whatsoever preparing for sale any article otherwise than in a retail store for the purpose of sale in such store exclusively and directly to the consumer
• “Importation” excludes bringing any article in the personal baggage of the passenger into Sri Lanka
• “Service” includes any business of real estate and improvements thereon