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VAT being levied as penalty causes Rs 125 million loss to govt

Published

5 years ago

2021/10/8

By Saman Indrajith

The government suffered a loss of Rs 125.5 million owing to a mistake committed in levying taxes on coal imported for the Norochcholai Thermal Power Plant, says the Second Report of the Committee on Public Accounts presented to parliament on Wednesday by Committee’s Chairman Prof. Tissa Vitarana.

The report says: It was observed that, Sri Lanka Customs has conducted a customs investigation and Rs. 205 million of penalty had been imposed and recovered regarding under payment of Rs.187, 068,787/- in respect of under calculated and paid value added tax (VAT) due to non-calculation of transport and other costs in importing the coal required for the Norochcholai Thermal Power Plant by Lanka Coal Company (PVT) Ltd., as per the provisions of Gazette Notification No.1994/18 dated 23 November 2016.

“The Committee observed that only Rs. 61.5 million was credited to the Government Revenue and as a result the Government lost Rs. 125.5 million due to the fact that VAT has been levied as a penalty instead of being levied as an additional tax, 50% of the fine levied amounting to Rs. 102.5 million has been given as rewards to the officers and 20% amounting to Rs. 41 million has also been credited to the officers’ welfare Management and Compensation Fund.”

The Committee has observed that the Inland Revenue Department, one of the three major contributors to nearly 90% of government revenue, has a large unresolved tax arrears and the government incurs a huge loss due to the delay in settling the arrears.

“Out of the computer programs of the Inland Revenue Department in this regard, the amount of tax in arrears pertaining to the institutions identified with respect to the Legacy system as at 30 March 2021 is Rs. 18 billion. Out of this amount, only Rs. 424 million has been recovered in cash. The amount of Rs.10 billion had been settled in the form of suspensions, tax and penalty deductions, penalty cuts, journal transfers and tax refunds.

However, it was revealed that, the Special Unit set up to settle the tax in arrears related to the Legacy system has settled a large amount of tax and the outstanding tax balance of this unit as at 31.03.2021 is Rs.79 billion only,” says the report.

It says: “According to the RAMIS (Revenue Administration Management Information System) system, the tax in arrears on that day was Rs. 87 billion. Of this amount, only Rs 4 billion had been recovered in cash. The amount of Rs. 60 billion was settled in the form of suspensions, tax and penalty deductions, penalty cuts, journal transfers and tax refunds. The Committee drew its attention to the fact that taxes classified under the category of ‘Recoverable Taxes’ were not in a position to be collected without any actual problems and the Committee observed that an overestimation of the taxes that could be levied due to this does not indicate the true situation.”

Presenting the report to the House, its chairman Prof Vitarana said that the committee had probed accounts of 16 public institutions and he was shocked to see the findings of some investigations.

The committee has observed that there was a loss of ability to reduce the road accidents by half due to the shortcomings of the technical equipment required to the Police who play a significant role in road safety and the necessity to transform the National Council on Road Safety into a National Commission.

“It costs between Rs. 1 million and Rs. 10 million to treat a person subject to a road accident and it was revealed before the Committee that a National Council for Road Safety consisting of representatives from 17 Governmental and Non-Governmental Organizations have been appointed to work on establishing a safe road network for all. The Committee emphasized that there is an urgent need to transform this National Assembly into a Commission.

The Committee also stressed that the Sri Lanka Police was found to be lacking in technical equipment to prevent road accidents and that the relevant parties should take immediate action in this regard and provide the necessary items as soon as possible.”

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PM on inspection tour of newly renovated Colombo Central Bus Stand

Published

12 hours ago

2026/04/10

Priyan

The Colombo Central Bus Stand, which has a history of over six decades and had remained without a proper maintenance for many years, has now been renovated under the current government’s development programme and vested to the public. Following that, the Prime Minister undertook an inspection tour of the newly renovated Colombo Central Bus Stand.

Originally constructed in 1964, the bus stand was refurbished with modern facilities to meet current needs and was officially reopened to the public on April 8. The primary objective of this initiative is to provide passengers with a higher-quality and more comfortable transportation service.

During the renovation process, special attention has been given to the comfort and safety of women, which was commended by the Prime Minister. In particular, a modern rest area designed to ensure privacy for nursing mothers travelling from distant areas received special praise.

The Prime Minister also reviewed the newly introduced passenger seat reservation system and information services established to assist commuters. In addition, the modern surveillance unit and other security measures installed within the premises to ensure passenger safety were also inspected.

During the visit, the Prime Minister engaged in conversations with passengers at the bus stand and inquired about their views on the newly renovated facilities and the quality of transport services.

It was emphasized that the government’s objective is to transform public transportation into a safe, technologically advanced service that can be used with convenience by all citizens.

(Prime Minister’s Media Division)

Latest News

Sun directly overhead Nagawilluwa, Galgamuwa, Sigiriya, Palugasdamana and Mankerni about 12:11 noon today (10)

Published

12 hours ago

2026/04/10

Priyan

On the apparent northward relative motion of the sun, it is going to be directly over the latitudes of Sri Lanka from the 05th to 15th of April in this year.

The nearest areas of Sri Lanka over which the sun is overhead today (10th) are Nagawilluwa, Galgamuwa, Sigiriya, Palugasdamana and Mankerni about 12:11 noon.

News

Opposition tells Minister Kumara Jayakody to resign

Published

14 hours ago

2026/04/10

Thilina Walpola

Prof. Peiris

No-faith motion to be taken up today

Former Foreign Minister Prof. G. L. Peiris yesterday (9) said that President Anura Kumara Dissanayake should remove Energy Minister Kumara Jayakody unless the minister stepped down on his own.Prof. Peiris, addressing a press conference called by the Opposition, said that Jayakody couldn’t under any circumstance continue to serve as a minister after the Commission to Investigate Allegations of Bribery or Corruption (CIABOC) moved the Colombo High Court against the government member over a previous financial scandal.

Pointing out that Minister Jayakody had been indicted of a corrupt deal struck during the yahapalana regime, Prof. Peiris said it was wrong for the NPP to retain him as a minister, claiming that the offence was not committed during his tenure as a Cabinet minister in the current government.

Prof. Peiris and several other Opposition members dealt with the No-Confidence Motion (NCM) against Jayakody that would be taken up today (10) with the academic calling the vote an acid test for the NPP. Having campaigned on an anti-corruption platform at presidential and parliamentary polls, the NPP couldn’t protect Jayakody though he was widely believed to be close to President Dissanayake.

As the Manager of the Procurement and Import Division of the Ceylon Fertilizer Company, Jayakody is alleged to have committed the offence of corruption, according to CIABOC.

Jayakody has been accused of causing a loss of Rs. 8,859,708 to the State by influencing and exploiting the procurement process.

Following the serving of indictments on 27 March, the judge ordered Jayakody’s release on two personal bail bonds of Rs. 1 million each. The court directed that the defendant’s fingerprints be obtained and a formal report be submitted. The case has been scheduled for a pre-trial conference on 6 May.

Prof. Peiris stressed that the CIABOC action against Jayakody is central to the NCM primarily moved over the irregularities ridden coal procurement process launched in 2025 that caused severe disruption to the power generation. Responding to The Island query after the media briefing, Prof Peiris expressed surprise that the JVP/NPP accommodated a person under investigation by the CIABOC. Having taken an utterly irresponsible decision, the JVP/NPP were now playing down the developing issue, prof. Peiris said.

The entire government parliamentary group faced the prospect of having its image tarnished by defending Jayakody, the former lawmaker said.

Prof. Peiris said that they intended to build a campaign around the issues involving the energy minister to expose the government. With yet another electricity tariff hike in the offing due to the growing demand for thermal generation as a result of coal-fired Lakvijaya power plant’s failure to meet the requirement[RA1] , the energy minister and ministry’s performances have to be examined, Prof. Peiris said.The timely release of the Auditor General’s report on controversial coal procurement should compel the government to decide on the energy minister’s fate or be prepared to face the fallout.

By Shamindra Ferdinando