Business

GST bill in Parliament by Sept

By Imesh Ranasinghe

The Government plans to table the new Goods and Services Tax (GST) Bill, which was proposed in the Budget 2021, in Parliament by the first week of September, The Sunday Morning Business learns.

Speaking to us, Ministry of Finance Department of Fiscal Policy Director General Kapila Senanayake said that the Legal Draftsman had finished drafting the GST Bill and that it was now being directed to the Attorney General for observation.

“Once the Attorney General gives the clearance, the Bill will be ready to be tabled in Parliament by the first week of September,” he said.

Announcing the Budget 2021 in November last year, Prime Minister Mahinda Rajapaksa, who was the Minister of Finance then, stated that Sri Lanka will introduce a GST for items including vehicles, cigarettes, telecommunication, alcohol and betting, and gaming.

Following this, the Cabinet approved the proposal presented by the Prime Minister in March 2021 to instruct the Legal Draftsman to prepare the GST Bill.

The GST is a single tax applied to the cost of certain goods and services, right from the manufacturer to the consumer. More precisely, the GST is imposed on the price of the product, and the customer who buys the product pays the sales price inclusive of the GST.

The first country to implement GST was France in 1954, and since then, an estimated 160 countries have adopted this tax system in some form or another. Some of the countries with a GST include Canada, Vietnam, Australia, Singapore, the UK, Monaco, Spain, Italy, Nigeria, Brazil, South Korea, and India.

Speaking to The Sunday Morning Business back in January, Treasury Secretary S.R. Attygalle said that the GST is a single tax which will be implemented in order 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,” Attygalle added.

Also, speaking to us back in January, Senanayake said that this new improvised tax structure through GST could further benefit companies.

“I think it will benefit all businesses as well as all other parties – take vehicles, for example; this (product) has an excise special provision, luxury tax, vehicle entitlement levy, and other taxes for the different categories. However, through this implementation, there will be only one tax,” he said.

According to him, payments and collection of the tax would be easy and there will also be increased transparency due to the online payment system.

Benefits of implementing GST include the easy administration of different indirect taxes by the Government. This is because multiple indirect taxes at the central and state levels are being replaced by GST and backed with a robust end-to-end IT system.

Additionally, the GST will result in higher revenue efficiency, as it is expected to decrease the cost of collection of tax revenues of the Government.

However, when GST is imposed, it is likely that the structural reform will change the entire taxation landscape. While implementing this new reform, India faced critical issues. Some of these include, that the government may change rates, subject to a cap of 20%, without requiring the approval of Parliament, because, according to the Central GST Bill 2017, the central government is allowed to decide on the CGST rates, subject to a cap.

Secondly, around 37 returns have to be filled in a year on the GST portal. This kind of arrangement requires access to the internet and being digitally literate. However, India’s performance in these two aspects was very low; according to some estimates, computer literacy in India is just 6.5%, and its estimated internet penetration had reached only 27% in 2016.