The Government's decision to postpone the imposition of VAT on wholesale and retail sectors, which was to come into effect from July 1, 2003 is a move to remove an additional burden on consumers in the event of a war situation in the Gulf, Deputy Finance Minister, Bandula Gunarwardana told the reporters.
He said a possible increase of fuel prices due to a war would affect wholesale and retail sectors resulting in price increases in commodities and the Government as a precautionary measure decided not to import VAT on this sector.
Under the Budget proposals 2003, the Government decided to subject wholesale and retail sectors to VAT expecting an additional revenue of Rs.800 million. However, professional institutions and trade chambers pointed out that a 10 or 20 per cent VAT on the wholesale and retail sector would result in drastic price increases.
According to S.R. Balachandran, an Executive Committee Member of the Income Taxpayers Association said a VAT imposed on this sector would have increased selling prices of items by two to four per cent.
"It would also be an additional burden to the Department of Inland Revenue causing difficulties in tax collection and to the trader who will have to maintain documents to claim VAT input Credit. It should also be noted that the one per cent Turnover Tax paid to the provincial council on total selling prices would also continue in addition to VAT," he said.
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