VAT reduction causing new problems - THASL | Daily News


VAT reduction causing new problems - THASL

The reduction of Value Added Tax (VAT) from 15% to 5% which is a part of the financial relief package that the government introduced to support the tourism sector in the aftermath of the Easter Sunday attack has created a new problem to hoteliers.

“With the reduction of output VAT rate to 5% all our input VAT of 15% is now disallowed,” Chairman, Tourist Hotels Association of Sri Lanka (THASL), Sanath Ukwatte told the Daily News Finance. Thus an additional cost of 15% is incurred on their operations.

He said that this relief on the industry has created more complications, without any material benefit.Hence in addition for any refurbishment/ capital expenditure and all other projects the input VAT of 15% is disallowed. “What that means is all our projects will be now 15% more expensive,” Ukwatte said.

This is a substantial increase where the construction or refurbishment of a hotel has a huge capital expenditure at this point of time. Thus this increment is not sustainable to any tourism project.

In order to overcome this problem the THASL urges the government to allow the tourism industry to recover 15% input VAT for a period of one year until such time the travel bans are relaxed and industry returns to normalcy.

“We believe that this is a genuine error as the reduction of VAT was part of the government relief package to support the tourism industry,” he added.

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