• Due process ignored in decision to postpone: SLTB Chair
• Hopeful IRD will carry out speedy registration: CTTA Chair
• CTTA hopeful of commencing auction by noon tomorrow

Colombo’s first tea auction for 2024, scheduled to be held on 2-3 January, is back on track despite tax-related teething issues, with the decision to postpone the auction being reversed following Government intervention.

The decision to postpone the auction due to the expected “significant negative impact” on tea prices following the introduction of Value-Added Tax (VAT) had been taken at an emergency meeting of the Colombo Tea Traders’ Association (CTTA) and communicated to Sri Lanka Tea Board (SLTB) Chairman Niraj de Mel on Friday (29 December).

“The committee is of the view that there will be a significant negative impact on the tea prices, as the process of registering all sellers for VAT and Simplified VAT (SVAT) cannot be completed by 1 January 2024,” CTTA Chairman Sanjaya Herath has informed SLTB Chairman de Mel in writing.

However, speaking to The Daily Morning on Sunday (31 December), de Mel revealed that he would be writing to the CTTA today (1) calling for the conducting of the auction on the initially-scheduled dates.

“Postponement has to be done with the concurrence of the Plantations Ministry and it was felt that it would be conducive to conduct the auction rather than postpone it, so that then we will know where the dust really settles,” he stated, explaining the Government’s stance on the matter.

De Mel further highlighted that due process had not been followed in deciding to postpone the auction: “The fundamental issue was that they decided on postponing without the concurrence of the Tea Board and, through it, the Plantations Ministry. That protocol had been missed out.”

The CTTA conducts the Colombo tea auction on behalf of the SLTB.

Decrying the decision to postpone, de Mel pointed out that the current situation was entirely different to what took place during Covid, which led to a postponement of auctions, and the terror incidents of 1983, during which it was impossible to even travel to the auction premises at the chamber.

Despite the issues relating to VAT not being fully resolved as yet, de Mel said they would be moving ahead with the hope that producer registration would be carried out speedily and that the registered tea manufacturers would obtain SVAT registration.

De Mel also noted that producers would be doubly burdened in the event of postponement, since it would come hot on the heels of the Christmas break: “During Christmas there is a traditional two-week gap and producers have been short on cash. Holding the auction means they can get money by selling whatever tea they have.”

Meanwhile, CTTA Chairman Herath speaking to The Daily Morning welcomed the move, asserting that that the CTTA’s ultimate goal was ensuring the best interests of the producer and it therefore hoped that the Inland Revenue Department (IRD) authorities would carry out a speedy registration process.

“We are hopeful that the authorities will get activated and do a bulk registration for SVAT and VAT. We have given the producers the application forms and they are expected to come down on 1 January and get registered. If the IRD is there to do it and give them a reference number, we are okay. However, they waited until the last moment to get activated,” he said.

Herath also noted that there were some teething problems and issues that needed ironing out despite the directive to go ahead with the auction, adding that the CTTA’s intention was to help long-suffering smallholders.

“At the end of the day, the producers will ultimately decide whether to place limits on their tea until this issue is resolved. Until a VAT or SVAT number is given to exporters, they are not going to buy tea from a particular factory,” he explained.

As things stand, Herath is hopeful that the IRD will deliver on its pledge to carry out a bulk registration. In that event, the CTTA will commence the auction by noon on Tuesday (2), he assured.

He added that the CTTA had created a dashboard to provide information to exporters on registered producers so that they would be the preferred sellers and would be supported accordingly.

While the tea industry is not averse to VAT, the tax-related unpreparedness had resulted in scepticism among buyers, leading to concerns that buying would become erratic and that producers would be going into the first auction to face a declining market.