Suspended VAT scheme:
An outstanding trade facilitator
VAT refund claims have been reduced to 5,000 from 20,000 in 2009,
said Deputy Commissioner General, Department of Inland Revenue Mallika
She said that in developed countries the refund claims are settled
within one month but in developing countries it might take months or
years due to many reasons. Samarasekera was speaking at a seminar on the
new suspended VAT Scheme.
She said the new scheme was introduced to address many issues -
minimis ing the number of refund claims, shielding the refund system
from abuse and to address trader cash flow concerns which occur due to
the delay in VAT returns.
She said that earlier an exporter had to go to the Textile Quota
Board (TQB) or the Export Development Board (EDB) and then to the Inland
Revenue Department (IRD). Now the system has been made simple with
exporters having to go only to the IRD.
Deputy Commissioner VAT Deepani Herath said that exporters who were
registered with either the TQB or the EDB have to re-register with the
Simplified VAT Unit of the IRD.
Exporters identified as Registered Identified Purchasers have to
issue credit vouchers to suppliers who are registered with the IRD for
the VAT component.
The vouchers must be obtained from the IRD and when obtaining new
vouchers the old copies should be given to the Department. She said that
if the purchase is not from a Registered Identified Supplier the claim
will be rejected.
She said that refunds are not made under any circumstances other than
the refunds outstanding up to March 31 this year with any upfront
payment made after April 1 to the Director General of Customs.
Herath said that reconciliation has to be prepared to prove that
suspended purchase has been used for the specific purpose. If not, it
would be treated as a taxable supply. The documents should be filed at
the department on or before the 20th of the following month.
Tulie Cooray expressing the industry perspective said that the
significance of the scheme is that the total export procurement and
supplies are brought under the formalized VAT system while removing the
cash flow burden of the export industry and government, minimizing
fraudulent activity as far as supplies to the export sector are
The success of the system will depend on the ability of the industry
to be compliant and the ability of the department to monitor. Therefore
electronic documentation is an important element which will be
implemented in time to come. Cooray said that the industry believes that
this is one of the most outstanding trade facilitation measures
introduced by the government to ensure the realization of the export
objectives of the value added economy.