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.
The Public Utilities Commission of Sri Lanka (PUCSL) has granted approval to increase electricity tariffs with effect from 1st April .
The Ceylon Electricity Board (CEB) requested a 13.56% electricity tariff revision for the second quarter of this year.
The revision announced by the PUCSL for domestic consumers:
0–30 units category, electricity tariffs will rise by 4.3%,
31–60 units category, tariffs will rise by 6.9%,
61–90 units category, tariffs will rise by 6.9%,
91–120 units category, tariffs will rise by 7.2%,
Above 180 units, electricity tariffs will rise by 25.3%
The PUCSL has decided not to increase electricity tariffs for religious and charitable institutions that consume below 180 units monthly and a 9.6% increase for institutions that consume above 180 units.
Ectricity tariffs for the general and household consumer categories has been increased by 8%, while the electricity tariff increase for the industrial sector is 8.7%, the increase in tariff for government institutions is 14.4%.
It was decided at the committee appointed to oversee the distribution of essential goods to appoint five officials from the Ceylon Petroleum Corporation to cover all ministries in order to examine fuel-related issues and undertake the necessary interventions.
It was further discussed that the responsibility of these officials would be to examine fuel-related issues arising in institutions under each ministry and to intervene in providing solutions by maintaining coordination with the Corporation.
These matters were discussed at a meeting of the committee appointed to oversee the distribution of essential goods, chaired by Minister of Transport, Highways and Urban Development Bimal Rathnayake held on Friday (27) at the Presidential Secretariat.
It was also noted, with particular attention, that requests have been made by industrialists indicating that the current fuel quota allocated to vehicles for the distribution of their products across the country is insufficient. It was further discussed that, if these concerns are not addressed, there is a likelihood of an increase in the prices of goods, which could in turn cause significant hardship to the public during the festive season.
The committee also discussed the issuance of fuel for the distribution of essential food items by state and private institutions, including supermarkets such as Sathosa, wholesale importers, tourism-related service providers, hotels and other service-providing organisations.
Accordingly, it was discussed that requests for fuel quotas submitted by these institutions should be carefully considered and prompt action taken as necessary and that such requests should be forwarded to the Ministry of Energy through the relevant ministries.
Attention was also drawn to the need for the swift implementation of a QR code system for the issuance of fuel to other sectors, including agriculture and the fisheries industry, based on letters issued on the recommendations of the relevant government officials, including agricultural research officers, instead of the previous method of direct fuel allocation.
Minister Bimal Rathnayake emphasised the need to ensure a continuous and properly managed fuel supply, with particular focus on providing goods to the public without shortages and preventing excessive price increases during the forthcoming Sinhala and Hindu New Year season.
The discussion was attended by a group of government officials, including Minister of Trade, Commerce, Food Security and Cooperative Development Wasantha Samarasinghe, Deputy Minister of Power Arkam Ilyas, Senior Additional Secretary to the President, Kapila Janaka Bandara and Chairman of the Ceylon Petroleum Corporation, D. J. Rajakaruna.
Parliament:
… sexual harassment claims dismissed
Recommendations made by retired High Court Judge Ms. Sujatha Alahapperuma, following an inquiry into claims by a female employee of the Department of Information Systems and Management of Parliament, regarding sexual harassment, denial of due salary increments and other forms of harassment, were yet to be implemented, sources familiar with the investigation said.
The retired HC Judge handed over the report to Speaker Dr. Jagath Wickramaratne on 24 November, 2025. Secretary General of Parliament Kushani Rohanadeera was also present on that occasion.
The retired judge has recommended that administrative decisions be taken expeditiously to grant her salary increments due for 2024 and 2025, reevaluation of all employees attached to the Department of Information Systems and Management and keep them under close scrutiny and strengthening of the ‘Helpdesk’ to meet the requirements.
Sources said that none of the recommendations have been implemented and the concerned employee in spite of still being the Senior Helpdesk coordinator remained attached to the Supplies and Services Office. She had been ordered to report to the Supplies and Services Office in January 2025 following a continuing dispute with the top management of the Department of Information Systems and Management.
Parliamentary Staff Advisory Committee on 25.07.2025 decided to conduct an external investigation into the issue after the employee refused to accept the outcome of the internal inquiry conducted in the wake of SJB lawmaker Mujibur Rahman raising the issue in Parliament.
The retired judge has emphasised the urgent need to take tangible measures to address administrative issues with a view to enhance discipline and human resources management among other issues.
However, the retired judge has declared that the complainant or any other female employee attached to the of Department of Information Systems and Management hadn’t been subjected to any form of sexual harassment as alleged.
The retired judge further asserted that the complainant had been prejudicially treated by two interview boards when she appeared before them seeking posts of Database Administrator and Parliament Officer.
The retired judge has also asserted that the Supplies and Services Office where the complaint continued to serve even now was not suitable and not in line with her qualifications. Some of those who had appeared before the retired judge during the inquiry claimed that was a temporary transfer. However, the report dismissed that claim declaring that transfer appeared to have been done outside acceptable procedure and her increments stopped without giving any justifiable reason.
The retired judge has stated that for want of proper procedures and systems, the administration seems to be in turmoil.
By Shamindra Ferdinando
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