Reintroduction of Special Commodity Tax Act

With the cost of living soaring and the general public finding it more difficult to cope with the increases, Hemaka Fernando, the General Secretary of the Essential Food Commodities Importers and Traders Association released a statement on the cessation of the Special Commodity Tax Act of 2007 which ended on December 25, 2007.

He said that the Minister of Trade and Commerce, Bandula Gunawardena said the lapse was due to criticism by the media, the public and the opposition for his program which came into effect March 1, 2007.

During the period, Fernando said the Ministry signed a monthly agreement with his association to control the wholesale prices of ten essential food items. Fernando said that although the program was successful in controlling wholesale prices, there was 'not much appreciation from the public for this effort because the consumers found the full advantage not being passed onto them.'

He added that the government has been concerned about the hardships faced by the less fortunate and therefore, at the recent budget presentation, the government made a provision for the state sector firms to import these essential food items on total duty free terms. 'By this cost benefit by way of duty waiver, the could add muzzle to their control,' Fernando explained. 'If prices of any food items are artificially jacked up by the private sector importers at any time by creating a scarcity, the government could dump the goods imported by them to the wholesale market to control the situation.'

Fernando said his association members were taken by surprise when the market hit an all time crisis on December 25 when the duty structure for these essential food commodities fell back to the pre March 2007 tax method and therefore, gave wide publicity to the issue. 'Having had no positive response to their negotiations with the treasury and the Ministry, the association appealed to the President.' Fernando said the President's timely intervention prevented a major crisis and this past week, Gunawardena announced the re-introduction of the Special Commodity Tax Act with effect from January 8, 2008.

Fernando said there are several advantages to the Act such as preventing the possibility of any importer under invoicing any shipment in order to reduce the quantum of taxes payable to the government. He also added that there is no room for any importer to default taxes to the state coffers because the entirety of the tax is collected at the port at the time of clearing the shipments.

He is also recommending that this method be adopted for all other commodities that are imported into the country such as textiles, electrical goods, luxury items and motor vehicles, due to the fact that the percentage based duty structure will always encourage a few unscrupulous importers to take undue advantage by under invoicing shipments.

With the Act having come into effect on 8 January 2008, the quantum of import duty charged per kilogram on each food item will be as follows:

Red Split Lentils – Rs.8/kg – Maximum wholesale price Rs.115/kg
Chick Peas – Rs.15/kg – Maximum wholesale price Rs.95/kg
Yellow Split Peas - Rs.15/kg – Maximum wholesale price Rs.112/kg
Green Mung - Rs.13/kg – Maximum wholesale price Rs.112/kg
Brown or White Sugar - Rs.14/kg – Maximum wholesale price Rs.54/kg
Canned Fish - Rs.25/kg – Maximum wholesale price per 425 gm Rs.95/tin
Big Onions - Rs.20/kg – Maximum wholesale price Rs.50/kg
Potatoes - Rs.15/kg

Red Onions - Rs.10/kg – Maximum wholesale price Rs.55/kg
Spratts - Rs.20/kg – Maximum wholesale price Rs.170/kg for Thailand and Rs.150/kg for Dubai
Dried Red Chili - Rs.30/kg – Maximum wholesale price Rs.170/kg (for Indian No.1 long stem Dried Red Chili)

Furthermore, Fernando said the Ministry will once again sign monthly agreements with the association 'to ensure that the benefits of the tax concessions are made available to the public through price control. (NG)