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Sunday, 15 May 2011

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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 Samarasekera.

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 concerned.

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.

SG

 

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