Exporters, deemed exporters and many other sectors are exempted from the Nation Building Tax increase from 1% to 3% in May, according to the Finance Ministry. Exporters are also exempted from the Economic Service Charge (ESC) for the year 2009.
“Because of the global situation the government decided to exempt all exporters and even deemed exporters from the ESC for one year. Exporters and deemed exporters and many other categories, are also anyway exempt from the NBT. So the NBT increase will not affect them,” a senior tax advisor to the Ministry of Finance R.P.L.Weerasinghe told The Sunday Times FT.
About 14 types of items and about 22 types of services are exempted from paying the NBT. Exporters say the tax exemptions are helpful but say much more helpful would be if the government addresses bigger problems like outstanding VAT payments due to exporters.
“The NBT exemption and ESC exemption for one year, and the rebate scheme are of course all helpful at this point. But it would be even more useful if the government can address the VAT outstanding payments. These are large amounts of money paid as VAT on imports, that the government has to pay back to exporters,” said the Vice Chairman of the Exporters Association of Sri Lanka, Lasantha Wickremasekera.
Billions of rupees are stuck in the VAT system at a time when exporters are in dire need of cash. “It takes between 3 – 6 months for the government to pay the VAT outstanding. Some exporters have not been paid for over six months. There are billions of rupees, due to exporters, stuck in the system,” said Mr Wickremasekera. Exporters say their cash problems are getting worse because buyers, affected by the global cash crunch, are either not paying, or, are asking for more time to pay. “This is the worst time for exporters because of the very high level of non-payments and extended credit terms. When we expect to be paid in 30 days buyers ask us to extend the payment time. We have no choice but to do this because we can’t lose the buyers that we have. So this is causing major cash flow problems,” said Mr Wickremasekera. |
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