VAT won’t be added to water, electricity and medicine

20 April 2016 02:12 pm - 9 - {{hitsCtrl.values.hits}}

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The VAT (Value Added Tax) will not affect essential food commodities, medicinal drugs, water and electricity as requested by President Maithripala Sirisena, Acting Finance Minister Lakshman Yapa Abeywardana said.

Minister Abeywardana addressing the weekly cabinet news briefing today, said Prime Minister Wickremesinghe met President Maitripala Sirisena last morning to discuss amendments to the tax reforms, following the President’s comments on Monday at Polonnaruwa that the average public will not be burdened by the VAT increase.

“The government has decided to increase the tax revenue to 20% of the GDP from the current 10% by 2020. There is a huge rise of state expenditure consequent to the increase of public servant's salaries, reduction of price of essential commodities and gas and power by the government. The government’s pension bill is also over Rs. 400 billion annually. Therefore, increase of tax for those who can afford it is unavoidable if we are to prevent a major collapse in the economy,” Minister Abeywardana stressed.

Sri Lanka’s traditional exports like tea, coconut and rubber has dropped due to economic and political turmoil in Russia, EU and the Middle East.

He said the VAT has been increased from 11% to 15% by May 2nd, this year but it will not be imposed on locally produced fruits, vegetables, fresh milk, drugs etc. Telecommunication services (land phones and hand phones) will also come under VAT.

Retail and wholesale trade will also be subjected to VAT while the ceiling for registration for VAT has been determined at Rs. 3 million for a quarter, Minister Abeywardana said.

All services provided by private hospitals and nursing homes will also come under VAT but not on drugs purchased from a private pharmacy or at Osu-Sala.

Minister Abeywardana said there will be a reduction in subsidies provided by the government and said that in real terms only 15,000 out of 77,000 taxable and 35,000 registered persons pay VAT now.

The government targets to bring down the budget deficit to 3.5% by 2017 from 5.9% in 2015.

The IMF has proposed a restructuring programme an a sound management for loss making state enterprises such as Sri Lankan and SLTB and the government was working on it. The World Bank and the Asian Development would start negotiating with Sri Lanka after the first tranche of 1.5 billion was released by the IMF within the next few weeks. (Sandun Jayasekera)

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Comments - 9

Wele Vidane Wednesday, 20 April 2016 02:56 PM

Means except water, electricity and medicine everything will go up.

Chandra Wednesday, 20 April 2016 03:22 PM

What is the percentage of monthly expenditure on water electricity and medicine, It is very minimum. Our President said VAT increment will not affect to general public. Then who lie?

kasuns Wednesday, 20 April 2016 04:24 PM

Terrible economic situation in Srilanka. People expected better concessions.Policies that need wide public acceptance these morons are doing within a month. No long term vision at all!!!

gamaya Wednesday, 20 April 2016 04:33 PM

Looks like we are all being considered fools

Dan Wednesday, 20 April 2016 04:35 PM

If I remember well some people promised to give free internet....was it in Sri Lanka or some other country...???

Banda Thursday, 21 April 2016 06:43 AM

Dear Minister, people send their children to private school not because they have money; government schools don't have enough room to facilitate those children. If the government can provide schools for every child you don't need private schools.

jayasinghe Thursday, 21 April 2016 08:13 AM

Can't the government instead control wasteful expenditure? Off the top of my head, the money spent on buying extra vehicles for all the ministers?

pharma man Thursday, 21 April 2016 09:12 AM

“Medicines including raw materials (both local and imported) should be free of any taxes, other tariffs and excise duties.” This is what the government endorsed ‘NATIONAL MEDICINAL DRUG POLICY FOR SRI LANKA’ states. So government can not deviate from the policy. http://apps.who.int/medicinedocs/en/d/Js17121e/

Sampath De Silva Thursday, 21 April 2016 03:35 PM

This is very negatively effect on private education. In every country education should be freed from tax or less tax facilitated. There is less attention given too for government education system as well. It's very unfortunate to see our country lacks this vision to develop next generation. On the other hand it's no wonder because Parliament itself lacking educated guys instead they have all types of ill educated fellows. Regards, Sam.

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VAT won’t be added to water, electricity and medicine

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