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.
Latest News
No-confidence motion against Justice Minister should be supported by facts as members’ noise does not establish facts – PM
“Our mandate is to establish the rule of law and restore respect and confidence in Sri Lanka’s justice system”
Prime Minister Dr. Harini Amarasuriya made these remarks in Parliament on Friday [July 24] while pparticipating in the parliamentary debate on the no-confidence motion against the Minister of Justice and National Integration, the Prime Minister emphasized that the Opposition had failed to substantiate its allegations with facts and had instead relied on rhetoric and personal attacks.
The Prime Minister further stated,
“There is no doubt that the incident that occurred on 5 and 6 July was tragic, and the loss of life is unacceptable. It is not something that can be accepted or condoned in any way.
Members of the Opposition must establish, through evidence and facts, how exactly the Minister of Justice and National Integration is solely responsible for what happened, and how his conduct before, during and after the incident amounted to a breach of trust. Noise, personal attacks, venom and rhetoric do not establish facts.
What we are hearing today is a distortion of the truth, misrepresentation of facts, half-truths at best, and a deliberate effort to viciously attack a member of the Cabinet. That does not establish the intent of this no-confidence motion.
The Prime Minister further noted that many of the structural deficiencies within the prison system predated the current administration and had remained unresolved for years.
She noted that longstanding vacancies in the prison service had persisted since 2022 but that the present Government had taken steps to address them.
“During the past year, 695 prison guards have been recruited, a further 190 recruitments are underway, and 18 Assistant Superintendents have been appointed. This is the first time since 2022 that these vacancies have begun to be filled.”
The Prime Minister further emphasized that the reforms undertaken to strengthen the Government Analyst’s Department, including filling vacancies, allocating funds for essential equipment, initiating procurement processes, and reviewing procedures to improve efficiency.
Addressing the need to ensure that the numbers of people in the remand are reduced , the Prime Minister stated legal reforms were already in progress, including amendments to the Poisons and Dangerous Drugs Act, which will soon be presented to Parliament. The Prime Minister stated that, “It is not that the Minister has failed to address these issues. Law reform does not happen overnight. It requires due process, and those processes are well underway.”
The Prime Minister also outlined measures taken by the present Minister of justice and national integration to improve prison conditions, including expanding healthcare services for prisoners and prison staff in collaboration with the Ministry of Health, introducing inpatient and specialized medical services, appointing new healthcare personnel, and improving access to treatment.
In addition, she highlighted rehabilitation initiatives aimed at reducing reoffending, including community rehabilitation programmes and vocational training to equip prisoners with employable skills upon release.
Reaffirming the Government’s commitment to comprehensive justice sector reforms, the Prime Minister further stated,
“Our mandate was to establish the rule of law and restore respect and confidence in Sri Lanka’s justice system.”
Prime Minister Dr. Harini Amarasuriya emphasized that the Government inherited a justice system that had been weakened by years of systemic corruption, institutional inefficiencies, and longstanding structural shortcomings. The Prime Minister further stated,
The task of cleaning up such a corrupted system is not easy. This incident is also needed to understand in that particular context of how the prison system was operated in the past It is this corrupted system that the Minister has been entrusted with the responsibility of cleaning up. This involves investigation within the Institution itself. It is not a easy task. This government has undertaken this difficult challenge.
It is very clear that this opposition so far will not be able to establish any facts that support the motion that they have brought forward. This is rhetorical exercises. This is not about justice system. This is another cheap effort by the opposition to get attention and part of a push back against the very reforms the government and the ministry has been undertaken”.
[Prime Minister’s Media Division]
Latest News
Develop a programme to allocate underutilised state land for investment by returning migrant workers – President
President Anura Kumara Dissanayake has instructed the relevant authorities to formulate a programme to allocate underutilized land, together with the necessary project support services, to Sri Lankan migrant workers returning home upon the completion of their overseas employment.
The President issued these instructions during a discussion held on Friday (24) afternoon at the Presidential Secretariat to review the progress of projects implemented under the 2026 budget allocations for the Ministry of Plantation and Community Infrastructure and to consider the Ministry’s proposals for the 2027 Budget.
The meeting included a comprehensive review of the progress of development projects being implemented by the Plantation Sector, the Community Infrastructure Sector and institutions under the State Plantation Companies operating within the Ministry. Discussions also focused on priorities, funding requirements and planned initiatives for 2027.
The meeting also reviewed key plantation sector initiatives being implemented under capital allocations of Rs. 1,081 million, including the estate land surveying programme, the disease management of coconut, the Kapruka Fund, initiatives to increase coconut production and the Northern Coconut Triangle Programme.
President Dissanayake also assessed the progress of ongoing infrastructure development programmes in the plantation sector. The President emphasised the importance of completing the project to construct 10,000 houses for the Malayagam community within the stipulated time-frame and handing them over to the beneficiaries without delay.
The President further noted that weaknesses in the implementation mechanisms for projects financed through foreign grants and loan assistance had resulted in certain allocated funds remaining underutilised or being returned.
President Dissanayake also reviewed the progress of the relief programme implemented to support the replanting of plantation crops, including tea, coconut and rubber that were damaged by the Ditwah disaster situation.
It was revealed during the discussion that the tea, coconut, rubber, cashew and palmyrah sectors, along with plantation infrastructure development activities, have recorded growth and improved profitability this year compared to the previous year. In particular, six state plantation companies, including Elkaduwa Plantations Limited, Kurunegala Plantations Limited, Chilaw Plantations Limited, Sri Lanka State Plantation Corporation, Janatha Estates Development Board and Kalubowitiyana Tea Factory Limited, are making significant progress in increasing their profitability.
Special attention was also given to crop production and related crop improvement programmes implemented by the Tea Research Institute, research and development activities and initiatives launched to support the replanting of smallholder tea plantations.
It was revealed during the discussion that approximately 60,000 hectares of Sri Lanka’s tea cultivation consists of smallholder tea plantations. Of the Rs. 450.06 million allocated in the 2026 Budget for the replanting of smallholder tea plantations, Rs. 155.07 million has already been utilised.
President Dissanayake also reviewed the progress of the 500 Tea Villages Programme implemented under the Tea Small Holdings Development Authority and instructed officials to expedite its completion by integrating the initiative with other rural development programmes, such as “Prajashakthi”, being implemented at the grassroots level.
The meeting also discussed the programme to revitalise rubber cultivation, including the allocation of Rs. 137 million in the 2026 Budget for the Rubber Research Institute, as well as the progress of rubber replanting initiatives and the challenges encountered during implementation.
In addition, discussions focused on the progress of programmes and research activities aimed at developing the coconut industry, enhancing productivity in coconut plantations, promoting new product development, increasing value addition and improving product quality.
The progress of programmes implemented under the Palmyrah Development Board and the Kithul Development Board to strengthen the palmyrah and kithul industries was also reviewed during the discussion.
It was revealed that Sri Lanka is expected to meet 18,000 metric tonnes of its annual cashew requirement of 25,000 metric tonnes this year, marking a significant increase compared to the previous year. The meeting also discussed the potential to expand cashew cultivation across approximately 15,000 hectares in the Northern and Eastern Provinces.
The progress of ongoing efforts to consolidate institutions within the plantation sector and the implementation of Cabinet decisions relating to non-commercial government-owned institutions were also reviewed. The meeting further discussed the need to update agreements entered into by previous governments when allocating lands to companies. Emphasising the importance of establishing stronger agreements regarding State-owned land allocations, President Dissanayake instructed that a committee be appointed through the Ministry of Finance to examine and address these matters.
The President also instructed officials to explore the possibility of offering courses conducted by the National Institute of Plantation Management through universities, in consultation with relevant higher education institutions.
Among those present were Minister of Plantation and Community Infrastructure Samantha Vidyarathna, Minister of Labour and Deputy Minister of Finance and Planning Anil Jayantha Fernando, Deputy Minister of Plantation and Community Infrastructure Sundaralingam Pradeep, Secretary to the President Dr. Nandika Sanath Kumanayake, Chief of Presidential Staff Prabath Chandrakeerthi, Senior Additional Secretaries to the President Russell Aponso and Kapila Janaka Bandara, Secretary to the Ministry of Finance, Planning and Economic Development Dr .Harshana Suriyapperuma and Secretary to the Ministry of Plantation and Community Infrastructure Gunadasa Samarasinghe. Chairpersons, Director Generals and senior officials of institutions under the Ministry of Plantation and Community Infrastructure also participated in the discussion.
[PMD]
Latest News
New Chairman and Members appointed to Delimitation Commission
President Anura Kumara Dissanayake has appointed M. K. Saman Sri Ratnayake as the new Chairman and a member of the Delimitation Commission.
M. B. Rohana Pushpakumara and K. Thavalingam have been appointed as the other members of the Commission.
The relevant letters of appointment were presented to them by Secretary to the President Dr Nandika Sanath Kumanayake at the Presidential Secretariat on Friday (24) afternoon .
The appointments have been made to fill the vacancies that arose following the expiry of the terms of office of the members of the Delimitation Commission.
[PMD]
-
Features7 days agoTwo memorable excerpts from a former SLAF commander’s memoir
-
Business7 days ago‘Giving up was never an option’: The fisherman who fought back after losing millions in SL
-
Life style7 days agoTaste of the Swiss Alps comes to Colombo
-
Features7 days agoErdoğan’s New Republic
-
Midweek Review4 days agoThree high-profile alleged suicides shaping key investigations
-
News19 hours agoFort Magistrate orders arrest of MP Archchuna
-
News4 days agoCustoms asked to resume probe or face legal action
-
Editorial19 hours agoAn indictment of all parties
