VAT exemption removal sparks fears of increased power and energy costs

15 November 2023 08:18 am - 6 - {{hitsCtrl.values.hits}}

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The proposed removal of Value-Added Tax (VAT) exemptions has raised concerns about the potential application of VAT on power and energy from January of next year.

Prior to the budget, the Cabinet of Ministers approved a 3 percent VAT hike to 18 percent effective from January 1, 2024, and said most of the VAT exemptions would also be removed.

The 2024 budget presented to parliament on Monday said almost all the VAT exemptions barring education, healthcare and food will be removed.

“The VAT rate will be increased up to 18 percent in January 2024 along with elimination of almost all VAT exemptions other than for products relating to health, education, and a few essential foods,” the budget speech said.

As of now, VAT is not applied on power and energy products—meaning on petrol, diesel and electricity.

When queried about the application of VAT on fuel and electricity with the proposed VAT exemption removal, Advisor to the Finance Ministry Deshal de Mel said it was not right for him to comment on it as the 2024 budget is yet to be passed in parliament, and pointed out that changes could occur at the committee stage of passing it.

He said this during a post-budget webinar organised by the Centre for Banking Studies, yesterday.

“Since the exemptions are only for education, health and food items, as mentioned in the budget, I believe VAT will have to be applied on power and energy from the beginning of next year, unless the government decides to make a change before passing the budget,” a tax expert told Mirror Business on the grounds of anonymity.

VAT is a consumption tax levied on goods and services ultimately paid by the end consumer. It is often considered a regressive tax because it tends to have a disproportionate impact on lower-income individuals and households.

According to the 2024 budget estimates, the government plans to raise Rs.2,235 billion from taxes on goods and services, substantially higher from the 2023 estimate of Rs.1,376 billion.

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Comments - 6

joshua Wednesday, 15 November 2023 08:45 AM

moment the exemption is eliminated, electricity, and fuel costs will have to include VAT. That would result in price going up by record 18% in one go. Very soon we will light candles at home and also to start walking to office. Thanks to the goons who made the country bankrupt and still sitting in that House without any shame. We also have a President who wants to mollycoddle the Rajapakshes and save them. But we general public have to pay for their sins. Surely there will be a special hell for these people. You would have seen the big talk of Namal as if he just landed from Mars.

Priyanee Wijesekera Wednesday, 15 November 2023 10:47 AM

Joshua should have the intellegence to realise that it was 6.9 million people like him that voted the so called goons to the House. to blame Ranil for that is bordering on insanity

Harin Fernando Wednesday, 15 November 2023 09:12 AM

Additional VAT for the next year is 860 billion. Population in the country is 21 million. Additional VAT per person for a year is around 40,000. A family has generally 4 members. Additional VAT per family for a year 160,000. Additional VAT per family per month 13,000 . Obviously you can't collect so much additional VAT unless you charge VAT on Power

Daily Mirror Humbug useless to give name Wednesday, 15 November 2023 11:51 AM

@ Joshua President had given the opportunity to present factual, digital, analytical presentation etc for considering by anyone. Joshua not expected, adhoc of your usual negative comments . Since you appear to be highly knowledgeable messiah on economic problems and reforms, kindly make a detailed written article in DM paper for us to read. Then can perceive who you are

N V Jen Wednesday, 15 November 2023 04:36 PM

First re-structure all loss making overstaffed state enterprises including the CEB, CGR, SLTB and SL Airlines, along with curtailing govt. expenditure which is a long overdue. The additional VAT and other taxes need not be imposed on the already downtrodden destitute majority of this country.

N V Jen Wednesday, 15 November 2023 04:37 PM

First re-structure all loss making overstaffed state enterprises including the CEB, CGR, SLTB and SL Airlines, along with curtailing govt. expenditure which is a long overdue. The additional VAT and other taxes need not be imposed on the already downtrodden destitute majority of this country.

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VAT exemption removal sparks fears of increased power and energy costs

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