VAT inquiry starts

The inaugural hearing of the Presidential Commission of Inquiry into the VAT fraud alleged to have taken place when making VAT refunds at the Inland Revenue Department, especially between October 1, 2002 and August 25, 2004, was held on Thursday at the BMICH. The Commission comprised retired High Court Judge M.P. Paranagama, S.M.J. Senaratne, R.K.H.M. Fernando and Secretary S.M. Samarakoon.

Among the matters to be probed by the Commission are whether VAT refunds had in fact been made to any companies that were not entitled to VAT refunds, whether the refunds had been made in accordance with the guidelines of the Inland Revenue Department, to identify officers responsible for any irregularities that may have been made and based on the findings recommend measures that could be taken to prevent similar incidents in the future.

A former Inland Revenue Department Commissioner Sarath Gunewardena appeared before the Commission on Thursday. The witness had served in the Southern Provincial Council in the early 1990s before becoming a Commissioner of the Inland Revenue Department, months before the introduction of VAT in place of the Goods and Services Tax (GST) in 2002.

During the first session of the hearing, Mr. Gunewardena (64) was questioned on the general guidelines relating to VAT as well as on the issue of responsibility. With regard to VAT refunds, Mr. Gunewardena said that in keeping with the guidelines, where a regular person makes an application for a refund of any tax paid by him in excess, he would be entitled to a refund for that particular amount if all requirements are met and documents are provided. However if the amount exceeds Rs. 100,000, an assessment should be made.

Speaking on the process of taxation, Mr. Gunewardena said that under the VAT act it was necessary that those liable for VAT are registered with the relevant departments and every VAT dealer allotted a Tax Identification Number (TIN). He said in most cases responsibility within the department lies with the relevant Deputy Commissioners of the four sub-departments.

The Assistant Commissioners of the relevant departments play a vital role in ensuring that the documents provided are legal. They are also responsible for the supervision of the officials and ensuring that work is carried out in accordance with the guidelines. The Commissioner-General is not responsible for the operations within the departments. However, should a technical matter arise or an issue cannot be resolved by the Deputy Commissioner or the Commissioner, the matter will then be referred to the Commissioner-General, Mr. Gunewardena said.The next sitting is on November 27.