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

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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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Our goal is to build a “Thriving Nation” where a woman can walk without fear or doubt, where her talents are duly recognized, and where she can lead a life of dignity – PM

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Prime Minister Dr Harini Amarsooriya in her message on International Women’s Day 2026 says that the governments goal is to build a Thriving Nation where a woman can walk without fear or doubt, where her  talents are duly recognized, and where she can lead a life of dignity.

The PM’s message:

“I extend my greetings to all sisters and daughters in Sri Lanka and around the globe on the occasion of International Women’s Day.This year, the United Nations has declared the global theme for International Women’s Day as “Rights. Justice. Action. For ALL Women and Girls,” emphasizing the realization of rights, the delivery of justice, and meaningful action for all women and girls.

Women are the true pillar of Sri Lankan society and economy. The role they play within the family and in society has today become a decisive factor in shaping the future of our nation. Through the Government’s policy statement, “A Thriving Nation – A Beautiful Life,” we envision going beyond treating women as mere beneficiaries and recognizing them as active partners in national development, ensuring that they receive the dignity and opportunities they rightfully deserve.

Within our policy framework, special focus has been placed on women. We are committed to recognizing the economic contribution extended by women as housewives, promoting women’s entrepreneurship, and expanding access to the technical and financial support necessary for self-employment alongside strengthening the legal framework required to ensure women’s safety in public transport, workplaces, and within the family environment. Further, we are taking steps to create the environment to increase women’s representation in decision-making bodies at national and regional levels. Special attention is also being given to implementing targeted programmes aimed at improving women’s nutrition, reproductive health, and mental well-being.

Women are not a group seeking sympathy; they are vital social partners endowed with intelligence, resilience, and creativity. Our goal is to build a “Thriving Nation” where a woman can walk without fear or doubt, where her talents are duly recognized, and where she can lead a life of dignity

On this International Women’s Day, I sincerely hope that it marks the beginning of a new era in which the aspirations of all women in our country are realized as they shine before the world.

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Heat Index at Caution Level in the Sabaragamuwa, North-western and North-central provinces and in Colombo, Gampaha, Vavuniya, Mannar, Hambantota and Monaragala districts

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Warm Weather Advisory issued by the Natural Hazards Early Warning Centre of the Department of Meteorology  at 3.30 p.m. on 07 March 2026, valid for 08 March 2026.

Heat index, the temperature felt on human body is likely to increase up to ‘Caution level’ at some places in the Sabaragamuwa, North-western and North-central provinces and in Colombo, Gampaha, Vavuniya, Mannar, Hambantota and Monaragala districts

The Heat Index Forecast is calculated by using relative humidity and maximum temperature and this is the condition that is felt on your body. This is not the forecast of maximum temperature. It is generated by the Department of Meteorology for the next day period and prepared by using global numerical weather prediction model data.

Effect of the heat index on human body is mentioned in the above table and it is prepared on the advice of the Ministry of Health and Indigenous Medical Services.

ACTION REQUIRED

Job sites: Stay hydrated and takes breaks in the shade as often as possible.
Indoors: Check up on the elderly and the sick.
Vehicles: Never leave children unattended.
Outdoors: Limit strenuous outdoor activities, find shade and stay hydrated.
Dress: Wear lightweight and white or light-colored clothing.

Note:
In addition, please refer to advisories issued by the Disaster Preparedness & Response Division, Ministry of Health in this regard as well. For further clarifications please contact 011-7446491.

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Lanka tea industry may lose $ 10-15 mn per week from ME war

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The ongoing military conflict in the Middle East has adversely impacted on the Sri Lankan tea industry as the exporters are unable to supply tea to the region. The exporters estimate the revenue loss at about $ 10-15 million per week. The exporters have orders in hand for supply of tea and it is the logistical issues and war risk preventing them fulfilling such orders, the Tea Exporters Association (TEA) said in a statement.

“In order to mitigate the impact on the industry, the tea industry has jointly requested the government to support it in addressing the cash flow issue and consider absorbing a part of the additional freight and insurance charges. It has also requested government intervention to obtain the balance payment of about $ 50 million due on tea shipments already made to Iran under the barter deal,” TEA said on Friday.

The statement said approximately 52% of Sri Lanka’s tea exports reach the affected region mainly coming from the low grown area of the country dominated by tea smallholder farmers. According to 2025 tea export statistics, about 125 million kilograms of Ceylon tea were exported to the Middle East, with an estimated value of USD 750 million. The major importing countries of Ceylon Tea in the region include Iraq, Iran, Libya, Turkey, Saudi Arabia, Syria, and the United Arab Emirates. Though Libya and Turkey can be reached via Africa, the exorbitant freight charges have prevented the buyers in those countries from importing tea at the moment.

The supply routes to Middle East countries go via Strait of Hormuz and Red sea Suez Canal. Although there is no blockade on Suez Canal, due to the war risk both channels are currently not used by the major shipping lines. The tea exports to the region have almost come to a standstill due to the following reasons:

=All major shipping lines suspended their services to the region immediately after the outbreak of the conflict.

=Several seaports in the region were temporarily closed during the initial stages.

= Although a few shipping lines resumed limited operations from March 4, freight charges have

increased significantly by approximately USD 1,800 for a 20’ container and USD 3,000 for a 40’ container.

= Existing insurance coverage obtained by exporters is no longer valid.

=There is a lack of regular and scheduled vessels operating from Colombo to Middle Eastern destinations.

The tea exporters are experiencing serious cash flow constraints, as payments for shipments already

dispatched have been delayed due to the unsettled situation in the region. This has restricted exporters’

buying capacity and that was evident at this week’s tea auction, where overall prices declined by about Rs. 50/ per kg while low grown tea prices declined by about Rs. 75/ per kg.

If the situation continues for few more weeks it will have a serious impact on the tea auction as buyers may curtail the purchase of tea if the outward movements are restricted. This could directly impact on the income of the tea smallholder farmers.

In January 2026, the country earned $ 121.8 million from tea exports compared to $ 112.7 million in January 2025 (a 5% increase). The figures for February 2026 are not yet available but should be either similar to last year or higher. The disruption to tea exports in March will certainly affect the volume and value of the exports though the exact amounts cannot be estimated at this point.

According to the available data Sri Lanka has settled about 95% of its debt to Iran by supplying tea to Iran under the Tea for Oil mechanism. Even if the military conflict comes to an end, Sri Lanka will find it difficult to continue to supply tea to Iran unless a new mechanism is introduced. Under the prevailing US sanctions on Iran, the exporters may not be able to supply tea to Iran outside the barter system. Iran purchases about 11 million kg of tea from Sri Lanka annually under the barter deal.

The situation was discussed with the Minister of Plantation & Community Infrastructure at a meeting held on March 4, 2026.

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