By now the entire country speaks about VAT and the Opposition politicians are extremely busy with misleading people about it. Some ignorant main media included certain VAT exempted items in the new list of items subjected to VAT. On the other hand, many cunning traders are also making maximum use of the theme `VAT’ in order to increase the prices of some goods sky-high. Some of those goods do not have anything at all to do with VAT.
Value-added tax (VAT) is a flat tax levied on an item. It is similar to a sales tax in some respects, except that with a sales tax, the full amount owed to the government is paid by the consumer at the point of sale. With a VAT, portions of the tax amount are paid by different parties to a transaction. The standard VAT rate in Sri Lanka increased from 15 percent to 18 percent with effect from 1 January 2024 (yesterday). VAT is payable on the importation of goods, on the supply of goods (including wholesale and retail trade), and on the supply of services in Sri Lanka. Provisions are made for filing returns monthly or quarterly, based on specified criteria.
Several essential food items will remain VAT-exempt despite the VAT increase. The key highlights of the revised VAT exemptions include several essential food items such as wheat, wheat flour, rice, rice flour, bread, and infant milk powder. Healthcare services, medications (pharmaceuticals, drugs etc.), locally manufactured surgical gauze, Ayurvedic preparations, artificial limbs, crutches, wheelchairs, and hearing aids, will continue to be VAT-free, except for hospital room charges. Financial services such as bank accounts, loans, and insurance will stay exempt. Import duty waivers are provided on certain products like aircraft parts and goods for government infrastructure projects funded by foreign loans. Exports, education, and public transportation continue to be zero-rated. The update aims to optimize VAT collections while minimizing the impact on low-income groups.
Despite those VAT exemptions, a large number of traders islandwide started to sell their goods for sky-high prices since last Sunday (December 31st) evening telling customers that they have increased the prices to match with VAT. The poor uneducated customers who do not know what VAT is, started to pay whatever price demanded by those crooks. For example, traders who sell metal around Bandaragama and Panadura areas sold one cube of metal for Rs. 10,000 last Saturday evening and they increased the price up to 12,000 rupees by Sunday (December 31st) morning even before VAT came into effect. It is the very same with the majority of all local traders who sell various goods. This is only one scam which uses the name `VAT’. The ordinary people blame the Government without knowing that it is the traders who increase their prices as they wish without any reason or control. The only way of preventing this type of cheating is setting up ‘flying squads’ by the Consumer Affairs Authority (CAA) to detect and arrest those traders who snatch innocent poor people’s hard-earned money.
A long time before increasing VAT from 15 percent to 18 percent, a well-organized social media campaign was launched by all anti-Government elements to mislead people and antagonize them against the Government. The main topic they use is `VAT’. It is extremely pathetic to see how Sri Lankan people are being misled by those individuals and groups using their low knowledge on VAT and all the other financial matters such as leasing agreements, etc. Taking legal action against all who mislead people is a must because the main objective of those anti-government elements is creating social unrest.
Arrangements should be made by all relevant authorities to educate the public on VAT and especially about the list of VAT exempted items because then no trader will be able to cheat them. For example, the majority of people do not know that medicines are exempted from VAT. People rarely go through the relevant Gazette notification which announces VAT exempted items. Media publicity should be given for the content of this Gazette notification without asking people to check it themselves. The authorities can order all traders to display a VAT exempted list of items inside their shops for the benefit of customers.
President Ranil Wickremesinghe has already described to people on many occasions how deep the financial crisis is. It is the responsibility of all relevant authorities to educate people on this issue in a simple manner. This is essential because Sri Lankan people remember anything only for two weeks’ time and after that,they remember nothing. Accordingly, they have totally forgotten all fuel queues, gas queues etc by now. Since everything is available freely without queues, people think that the country has fully recovered from the financial crisis. It is essential to educate the ordinary people on how their tax money assists the country to recover from history’s gravest financial crisis.
We should not forget one thing. People can be misled. Gobbles’ Theory works! People should know the truth. The truth is pharmaceuticals and drugs (medicines) are VAT exempted. Social media hardly speaks the truth.
