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Confusion over who keeps VAT charges
The Supreme Court’s ruling to suspend the value added tax (VAT) introduced by the government in May has caused confusion among businesses and consumers with questions being asked about the money raised so far by the tax.
The VAT was introduced through newspaper advertisements by the Inland Revenue Department (IRD) that said 4 per cent increase in VAT would be imposed on all businesses to bring VAT to 15 per cent, with no exemptions any longer for the health and telecom sectors.
Consequently, private hospitals and telecom sectors slapped on a massive 15 per cent increase on bills from May 2 to August 9.
With the court ruling that the VAT was illegal in the way it was introduced, consumers ask whether the monies taken from them would be refunded. Many patients have had hospital bills running into several lakhs, if not millions.
While some businesses said the monies collected for VAT have been remitted to the Inland Revenue Department (IRD) others said that they are awaiting a directive from the IRD for action.
A top official from the IRD said there has been no directive from the Finance Ministry on a future course of action.
The official said in the meantime businesses should not be confused over VAT charges as the original 11 per cent VAT prevails. “The prevailing law stands – the Nation Building Tax (NBT) of 2 per cent and VAT of 11 per cent stands,” the official said.
The Director-General of Fiscal Policy in the Finance Ministry, A.K. Seneviratne, maintained the Supreme Court had ruled the extra VAT charge to be invalid only because it had not received parliamentary approval. “There is no need to refund money. Businesses are only collecting agents,” he said.
Meanwhile, small businesses and food outlets, which had increased the price of products immediately after May 2 are continuing business as usual
The Bakery Owners’ Association, which increased cake and pastry products from Rs. 5-10 denied increasing prices. “We never increased the prices in the first place,” the association’s President, N.K. Jayawardena, said. Other food outlets are also continuing to sell takeaways and rice packets at post-May 2 prices.
Hotels and restaurants, however, said that they had reverted to an 11 per cent VAT. City Hoteliers Association Chairman M. Shanthikumar said the association was seeking advice from its auditors on the 4 per cent VAT increase already collected.
Dialog Axiata, the largest private mobile network provider in Sri Lanka, said it had stopped charging VAT from customers from July 11 and was awaiting a directive from the IRD. “We will comply with the IRD directive,” company spokesman Darshana Abayasingha said.
Telecom General Manager, Praba Ambegoda too said Telecom had stopped taking VAT from customers from July 11. “We have not received any instruction from the IRD. The department has to give a directive,” he said.
Private Hospitals Association (PHA) General Secretary, Wijeya Ransi said it had directed all private hospitals to stop imposing VAT on patients. “The VAT collected from May 2 to July 11 has already been sent to the IRD,” he said.
Prime Minister Ranil Wickremsinghe said last week that the interim order of the Supreme Court suspending the implementation of the recent VAT revision was no bar to revenue collection.
He said the legislative process in passing the bill in parliament would soon be completed and the revised (4 per cent more) VAT rates would still be applicable from May 2.
| VAT Bill sans Cabinet approval ignores due procedure: Apex Court The much discussed Value Added Tax (Amendment) Bill which was to have been debated and passed in Parliament this week, was shot down by the Supreme Court (SC). According to the SC, the Constitutionally prescribed process of obtaining Cabinet approval before presenting a Bill, had not been followed by the Finance Minister in relation to this Bill. The SC Bench comprising Chief Justice K. Sripavan, Justices Priyasath Dep P.C. and Upaly Abeyrathna, in its determination sent to Speaker Karu Jayasuirya said that, “Combined effect of Article 152, read with Standing Order 133, makes it abundantly clear that, prior to the presentation of a Bill in Parliament, it is mandatory that the approval of the Cabinet of Ministers on such Bill is obtained.” “If the Bill is presented to the Cabinet, it may or may not signify its approval. It may even approve the Bill subject to certain amendments. These procedural safeguards are the handmaids of equal justice and guarantee equal protection of law to the citizens of the country,” the SC said. It added that, the Hansard of July 8, 2016 makes it clear that the Minister of Finance who introduced the Bill, did not signify Cabinet approval. “Provisions relating to the imposition, assessment and collection of taxes are to be given strict construction, as they impose financial burdens on the taxpayer, and therefore, the related provisions have to be strictly complied with, as it relates to public revenue,” the Court said. |