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GST faces further delays

22 May 2021

  • Bill lagging at AG’s Department

By Yakuta Dawood   [caption id="attachment_137391" align="alignright" width="370"] S.R.Attygalle[/caption] The Goods and Services Tax (GST), which was expected to come into effect before the end of the first quarter this year, is still lagging at the Attorney General’s (AG) Department, The Sunday Morning Business learns.  Treasury Secretary S.R. Attygalle stated that the necessary document to implement the tax has been drafted and is at the AG’s Department for clearance at the moment, after which it will be subsequently submitted to Parliament for approval. “It was scheduled to be in effect before the end of the first quarter, but it will take time. It’s still at the AG's Department; after it’s cleared it will move forward,” Attygalle explained.  The GST was announced under Budget 2021 by Premier Mahinda Rajapaksa who is also the Minister of Finance. According to him, Sri Lanka will introduce GST for items including vehicles, cigarettes, telecommunication, alcohol, and betting and gaming. Attygalle, speaking to us in January, said: “It is a single tax because we want to simplify the existing tax system, without having five or six taxes for one product or service. It is one single tax, like the International Monetary Fund (IMF) wants.” According to him, GST would be collected by agencies under the Ministry of Finance, and an accounting officer at the Ministry would be responsible for the collection. However, it is not assigned to the Department of Inland Revenue (IRD) as would usually be the case for any other tax implementation. On a further note, he also added that the percentage of the tax would depend on the commodities and would be decided shortly. Meanwhile, speaking to us, Minister of Trade Dr. Bandula Gunawardana said that since the current Government came to power, Income Tax, Value Added Tax (VAT), and other taxes have been reduced “significantly”. Hence, it will be beneficial to the Government in terms of tax revenue with the implementation of the GST system in Sri Lanka. Further, we also spoke to Ministry of Finance Department of Fiscal Policy Director Kapila Senanayake, who said that due to the implementation of GST, the payment and collection of tax will be easy, while also boosting transparency due to the online payment system. “I think it’s beneficial to all businesses as well as all other parties. Some of the companies have sent some proposals on how to implement this tax, and we will also analyse their concerns as well, but it’s not discussed yet,” Senanayake noted. Later, he added that the preparation for the implementation of GST is almost complete with a simplified tax structure which would eventually benefit the respective companies.  “For example, take vehicles: these have the excise special provision, luxury tax, vehicle entitlement levy, and other taxes for different categories. However, through this new implementation, it will be only one tax. It’s easy to implement as there won’t be any issues,” Senanayake said. In January, we spoke to an alcohol company that would be subjected to this tax before the end of the first quarter. A senior company official who wished to remain anonymous told us that the industry is not certain about the tax or the tax structure, and added that whilst they have spoken to the relevant authorities, no clear directives were given to the industry yet. “They are combining all the existing taxes. As of now, taxes imposed on those categories are not consistent; some are charged on value (VAT), some are product-based, and some are revenue and unit-based, and they are trying to merge them together, so this is not easy – it is a cumbersome process. We still do not know the impact we will face,” the official noted. Likewise, another leading alcohol manufacturer in January told us that they had not received anything in writing, and do not want to comment on the tax until they do.

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