Govt: VAT hike won’t affect essentials

by Zacki Jabbar

Amidst protests by the Federation of Traders Associations , the government says that the proposed blanket increase of Value Added Tax (VAT) from 11 percent to 15 percent would not apply to essential goods and services.

A circular to this effect would be issued shortly, Co-Cabinet Spokesman and Health Minister Rajitha Senaratne said on Friday.

Asked about reports that the government was determined to go ahead with an all-round VAT hike, Senaratne replied that it was not correct. "Mischievous elements are spreading such stories. A circular would be issued shortly to exclude essential goods and services including water, electricity, health and education."

Admitting that a blanket VAT increase would affect mainly the small trader, he said that the prices of 16 essential commodities required by the people on a daily basis had already been fixed by the Ministry of Industry and Commerce.

The Minister noted that among the items which came under price control were chicken, red dhal, sprats, chic peas, green gram, canned fish, white sugar , wheat flour, full creamed milk powder, potatoes, big onions, dry chillies, dry fish, Maldive fish and Sustagen.

The Federation of Trader’s Associations (FTA) said it had sought a meeting with President Maithripala Sirisena to discuss the proposed VAT increase and widening of its applicability to the wholesale and retail trade with a turnover of Rs. 33,000 a day and above. "It is not just a question of taxation, but a matter that has placed their very existence in jeopardy."

It has also expressed concern about the impact that VAT of 15 percent would have on purchasing power of the public and general business climate in the country.

The Supreme Court recently ruled that Parliament had to approve the issue of Gazette notifications.

Senaratne said that the government had only adopted procedure followed since Independence. "Now we will have to re-examine the procedures."

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