News
Harsha finds many drawbacks in VAT system, ‘including lot of confusion even at highest echelons’
By Rathindra Kuruwita
There is a lot of confusion over the amendments to the Value Added Tax (VAT), and it will take a long time for the authorities to address the teething problems in the relevant software systems, Samagi Jana Balawegaya (SJB) MP, Harsha de Silva says.
Dr. de Silva pointed out that there was still a lot of confusion even at the highest echelons about the amendments to VAT. “Even the Colombo Tea Auction was suspended because they have no idea as to how VAT would affect their operations. We also need to ensure that the software at the IRD is ready. I think we will take some time to address technical issues that will arise,” Dr. De Silva said, noting that the amendment to the VAT regime was not that complicated. Goods and services that were taxed at 15 percent have been increased to 18 percent. Moreover, 97 items that were exempt from VAT previously were now subjected to VAT, he said.
“But people need to be better educated on how they should pay VAT. A company that has a turnover of over Rs 60 million a year must be registered for VAT. So, people might wonder if they have to pay VAT, if they buy a milk packet or an exercise book from a supermarket and whether they do not need to do so when they buy one from a roadside shop,” Dr. de Silva said.
“It is obvious that traders are taking advantage of this confusion,” he said, adding that traders were only acting as an agent for the government when they collected tax from the consumer.
“They can’t pocket the money so collected. They have to hand over that money to the state. There are also many issues in the efficiency in collecting taxes by government agencies. These loopholes will allow corrupt businesspeople to manipulate the VAT system,” he said.
The SJB MP added that Sri Lanka had a history of VAT frauds. Those between 2002 and 2004 had cost the Inland Revenue Department dear, he said.
“The government said that from 01 January 2024, everyone over 18 had to obtain a Tax Identification Number (TIN), which had to be produced when opening a bank current account, securing approval for a building plan, registering a motor vehicle or renewing a revenue licence, and registering land or a title to land by the buyer. The government informed us so in November. But this week the government has given a one-month grace period. So it’s obvious that the government has not done enough to ensure compliance,” Dr. de Silva said.
The coming year would be extremely difficult for the average Sri Lankan given the government’s target to double the revenue from VAT compared to the previous year, he said.
The government was planning to collect about Rs 1,400 billion from taxes in 2024, he said.In 2023, the government had sought to rake in about Rs 700 billion from VAT, Silva said.
“So, the government is planning to collect double that amount in the current year. It is obvious that the average Sri Lankan family would be severely affected by the enhanced VAT,” he said.
“Before 01 January 2024, the VAT was not imposed on diesel and petrol. The government has imposed an 18 percent VAT on them. These products were subjected to the Ports and Airports Development Levy (PAL) of 7.5 percent before, and this levy has been repealed. So, the actual increase in taxes due to the application of VAT to diesel and petrol is 10.5 percent.”
The SJB MPs said that there were Sri Lankan companies that produced software for Sri Lankan companies. Their products were now subjected to VAT. But if the software came from overseas it was not subjected to VAT, he said.
“This is a big problem. We must help the local companies. We, members of the Committee on Public Finance, tried our best to resolve this issue. Our proposal was that the government must not consider where the software originated from. We asked it to consider where the software was used. If the service is used in Sri Lanka, it should be subjected to VAT. The President then asked the Treasury Secretary to implement our proposal,” he said.
Teachers, principals up in arms against alleged NGO driven education reforms
Teachers, principals and education professionals on Friday vowed to commence a nationwide campaign against the government’s plans to reform the education sector at the expense of what they described as cultural values.
President of the All-Ceylon United Teachers’ Association Ven Yalwala Pannasekera thera addressing a press conference yesterday said that trade unionists would join forces to urge the government to withdraw its educational reforms.
“We are ready to form a common front with education professionals, teachers and principals against this government. We demand that the government withdraw these reforms or get ready to go home,” Ven Pannasekera said.
“Some modules promote homosexuality. Contents in some of the modules being distributed have been copied from Indian text books.
We ask the government to explain why it had paid the National Education Institute curriculum designers,” Ven Pannasekera said.
Meanwhile, representatives of 16 teachers’ and principals’ unions visited the National Child Protection Authority yesterday to lodge a complaint demanding a probe into the inclusion of materials promoting homosexuality in school books.
Concerns were also raised at a National Sangha Council meeting held in Colombo last week at the Colombo Foundation Institute, organised to discuss the objectives of the proposed reforms.
Addressing the gathering, Professor Venerable Induragare Dhammaratana Thera said the reforms required extensive discussion, consultation with subject experts and consideration of the experience of senior administrators.
He warned that the proposed education reforms could trigger the biggest crisis currently facing the country. “Implementing these reforms in this manner will harm future generations and could even destroy the present government,” he said, likening the process to “forcing a round peg into a square hole.”
The Ministry of Education on Friday decided not to extend school hours for the 2026 academic year, citing the ongoing impact of recent disasters on schools and transport systems in several provinces.
According to the Ministry, school hours for Grades 5 to 13 will remain unchanged at 7:30 a.m. to 1:30 p.m. until both education and transport networks are fully restored.
Government schools, government-approved private schools, and pirivenas are set to begin the first term of 2026 on January 5. Students in Grades from 6 to 13 will have seven 45-minute periods a day.
Education reforms will be introduced for Grades 1 and 6 in 2026.
The Ministry confirmed that activity books for Grade 1 and learning modules for Grade 6 will be distributed before lessons begin. Textbooks for all other grades have already been fully handed out.Meanwhile, the remaining sessions of the 2025 G.C.E. Advanced Level examination are scheduled to take place from January 12 to January 20, 2026.
by Chaminda Silva ✍️
The Sri Lanka Red Cross Society will provide relief funds totaling Rs. 2,420 million to assist 20,000 families displaced and 8,000 families who have lost their livelihoods due to cyclone Ditwah.
Accordingly, the Society has arranged to give Rs. 1,620 million to 20,000 displaced families, at the rate of Rs. 85,000 per family, and Rs. 800 million to 8,000 families who lost their livelihoods, at Rs. 100,000 per family, Sri Lanka Red Cross Communications Head Navindra Senarathne told the Sunday Island on Friday.
He said the funds for the 20,000 displaced families would be distributed in three instalments.
A total of 20,000 families across the country, including 1,505 families in the Trincomalee District, have been selected for this relief, with beneficiaries identified by the decision-makers of the Sri Lanka Red Cross Society, he added.
In addition, the Society is preparing to install toilet systems in 400 safe centers and provide 15,000 sets of school equipment worth Rs. 7.5 million, Navindra Senarathne told the Sunday Island.
By Sirimantha Rathnasekera ✍️
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