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Constitutionality of VAT Bill challenged in Supreme Court
View(s):By Wasantha Ramanayake
“There was no proper Bill before Parliament for its approval,” Counsel argued in the Supreme Court on Thursday, when it considered the Value Added Tax (VAT) Amendment Bill for its Constitutionality, seeking a determination that the Bill should be passed by two-third majority and by the people at a referendum.
The Bench comprised of Chief Justice K. Sripavan, Justice Priyasath Dep and Justice Upali Abeyratne.
Taking the preliminary objection that the draft Bill had not been approved by the Cabinet of Ministers, before it was sent to Parliament, as required by the Constitution, it therefore, could not be a proper Bill, contended Manohara de Silva P.C. on behalf of UPFA Gampaha District MP Sisira Jayakody.
Counsel Canishka Witharana appearing for lawyer and MEP Executive Council member Nishantha Wimalachandra, argued that, “Certain clauses in the Bill sought to antedate the operative date to January 1, and the liability to pay VAT. As a result, traders who are liable to pay VAT with retrospective effect, would be charged on transactions already concluded, without having collected VAT from the customers.”
“This impossibility,” Counsel contended, “resulted by due compliance with law, would create a situation where persons who acted in breach of the law would be placed at an advantageous position, retrospectively, against those who duly complied with law during that period. Thus it would violate the right to equality before the law guaranteed by the Constitution. Therefore, it should be approved by the people at a referendum.”
Senior Deputy Solicitor General responding to preliminary objections, argued that, the VAT revision was a policy decision approved by the Cabinet of Ministers. Therefore, it was a matter that could not be reviewed by the Court. It was a matter for the Legislature.
Four Petitioners stated that the amendments would effectively increase VAT rates to 15% from 12%, and the threshold for VAT registration reduced to Rs 3 million per quarter. Wholesale and retail trade were made liable to VAT and their threshold for liability was reduced to Rs 3 million per quarter. “Currently, exempted supplies such as supply of telecommunication services, import or supply of telecom equipment or machinery, high tech equipment including copper cables for telecom industry, the issue of licensces to local telecom operators by TRC, supply of healthcare services, supply of goods or services to any specified projects other than housing projects, were also made liable to VAT,” stated the Petitioners.
They argued that these amendments to the principal Act would be in violation of certain provisions of the Constitution. Therefore, it needs to be passed by a two-third special majority in Parliament and by the people at a referendum. The Supreme Court’s determination of the Constitutionality of the Bill,would be submitted to the Speaker.
Last week, the Sunday Times report on the five Fundamental Rights petitions filed challenging the VAT and NBT, inadvertently named the Centre For Policy Alternatives as one of the Petitioners.