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| Sunday, 2 June 2002 |
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Industrial Association calls for tax relief Anomalies in the Port and Airport Development Levy, Debit Tax and Value Added Tax (VAT) have been highlighted by the Industrial Association of Sri Lanka (IASL) as anomalies in the Budget 2002. The IASL has written to the Minister of Finance K.N. Choksy regarding these issues. A levy of one per cent has been introduced on the declared C&F value of all cargo imported to Sri Lanka. This levy replaces the 15% stamp duty paid on letters of credit and commercial invoices presented to the Director General of Customs. A subsequent press notification exempted (1) imports by diplomatic missions (2) import of diamonds, gems, gold, jewellery, any electronic item or components imported for re-export after processing. "We are of the view that the special concessionary rate of 0.5 per cent should be available for imports used by the export sector and for imports used for the sale of goods in any duty-free shop so as to continue the incentive given to the sector. This concession is essential for the export sector especially to the garment sector since 60-70 per cent of the FOB value of garments exported consist of imported materials. This sector is already struggling due to the US recession, and the increase in overseas competition including subsidised competition from overseas factories specially from Vietnam and China," the IASL said in the letter to the Minister. The Port and Development Levy is already in force. Therefore, notice should be given immediately regarding the applicability of the concessionary rate and directions should be given to the Director General of Customs. Though the Debit Tax is in force, no precise guidelines have still been issued to the relevant financial institutions covering the applicability, implementation and recovery procedure, according to the IASL. The members have said that it is a retrogressive tax that would increase transaction costs, resulting in price increases and inflation. This tax would hamper banking services and would result in a cash economy with concerns on security and convenience, they said. Clarification has been sought on the applicability of the Debit Tax on inter-account transfers within the same bank and the treatment of various GL accounts of banks and inter-bank transactions. The IASL has requested the Minister of Finance for assurance that the National Security Levy (NSL) will not be re-introduced in the event of an escalation in defence expenditure, in addition to the VAT. Furthermore, under the NSL Act of 1991, a concessionary rate of 0.5 per cent was levied as NSL on the import of manufacture of any plant machinery or equipment excluding motor cars, motor coaches and lorries. This decision was taken to assist the manufacturing sector. These imports will now be liable for VAT at the higher rate of 20 per cent. The IASL has requested for the concession available under the NSL to be continued and the tax to be continued at 10 per cent. Under the Goods and Services Tax statute, the import and supply of motor coaches with a seating capacity of not less than 28 seats used for public transport was exempt. The same exemption was provided for leasing facilities of such motor coaches. Leasing facilities for motor coaches used for public transport remain exempt under VAT, but the import and supply of such motor coaches are liable for VAT at 10 per cent. "Since leasing companies would not be in a position to claim the input VAT, they will be compelled to add the cost of VAT to the lease rentals which would make the leasing of such vehicles prohibitive," the Industrial Association said. |
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