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Consumers shelved as VAT devalues supplier enthusiasm to stock supermarkets
View(s):By Mirudhula Thambiah
Shortage of food stocks in supermarkets has disappointed customers, as suppliers reluctant to bear the newly imposed 12% Value Added Tax (VAT) introduced in the 2013 Budget, have ceased supplying supermarkets. The Sunday Times visited leading supermarkets within Colombo city and the suburbs to investigate consumer complaints regarding shortages in essential items and other commodities.
Bare shelves: Pix by Mangala Weerasekera
There were empty shelves in supermarkets displaying labels, ‘Sorry out of stock’, as suppliers stopped distributing. Milk powder, cheese, biscuits, chocolates, canned fish, energy drinks, soft drinks, cooking oil, cosmetics such as shampoos and deodorants and mineral water were some of the goods out of stock. Supermarket managers claimed that the situation had improved since the last two months, as some of the suppliers have agreed to bear the VAT, and have resumed supplies. However, consumers are wary of the VAT being passed onto them.
Kumari Vasana Perera a regular ‘supermarketer’ from Pitakotte, told the paper that she relied mostly on the nearest supermarket for her daily needs. However, in the recent past, she has had to return home without certain goods, adding that, she has had to travel ‘further afield’ to complete her purchases. Varuna Peiris another regular ‘supermarketer’ from Nawala said that, although present-day supermarkets stock the latest brands, of late, some of the essential and quality brands were still out of stock. “I find it hard to get popular brands of body sprays and shampoos as they are not available,” he added.
Meanwhile, Vani Shanmugam from Wellawatte said that the supermarkets near her residence stock all the essential goods and latest trends at present, despite experiencing a shortage at the beginning of last month. However, senior officials of these supermarkets claimed that stocks have been updated as suppliers have agreed to bear the VAT, without passing it on to the consumers.
The Sunday Times learns that supermarkets have demanded that suppliers compensate them for losses from the new VAT and NBT (nation building tax). Laugfs Sunup Supermarkets (Pvt) Ltd, CEO Ravi Dahanayake told the Sunday Times, that their supermarkets are updating stocks without disruptions, as most suppliers have agreed to bear the VAT, and consumers will not be affected. However, an official from Cargills Ceylon PLC refused to comment on the VAT, while confirming that there hasn’t been a shortage of goods since the beginning of this year.
The sales margin of 30% to 40% of the suppliers will be reduced in half by the VAT and NBT on supermarkets. The 2013 Budget imposed VAT and NBT on supermarkets and trading businesses with a quarterly turnover of Rs. 500 million or more, expecting an annual revenue of Rs. 5,250 million. The Consumer Affairs Authority (CAA) stated that taxation imposed will be on turnover and not on goods, and has proposed that supermarkets separately display the additional VAT to the price, along with the price of the goods on display, to avoid confusing customers.
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