Duties, taxes shake tile and sanitary-ware sector
The move to enforce long-overdue anti-dumping laws, in order to ensure the fairness in trade and to safeguard the domestic industries from unfair competition from imports, transpired at an official meeting recently.
It was revealed that previous governments failed to enforce these laws, allowing substandard and undervalued goods to infiltrate through customs.
Although the Anti-Dumping and Countervailing Duties Act was enacted in 2018, before the country entered into its first comprehensive bilateral trade deal with Singapore in the same year, the authorities failed to establish a mechanism to implement this law.
However the government’s move to introduce protectionist policy aimed at encouraging the growth of domestic manufacturing in the absence of quality alternatives, can lead to increased costs for consumers, worsening inflation and reducing purchasing power in the short run, several economic analysts said
“As a result of the impending increase in taxes and the enforcement of anti-dumping duty, Sri Lanka’s tile and sanitary ware importers and the construction sector, already battered by the COVID-19 pandemic, import restriction and tax hike, will hit rock bottom, the Tiles and Sanitary ware Importers’ Association President D. Vigneshwaran told The Sunday Times Business.
“Our businesses now face a devastating combination of import bans and punitive tariffs, with tax rates set to climb as high as 133 per cent, he said.
Customs data highlights that local manufacturers supply only 45 per cent of the tile market, with the remaining imported and subjected to prohibitive duties.
For example, the cost of a 2×2-foot tile has skyrocketed from Rs. 650 to Rs. 1,750, while an imported commode that once sold for Rs. 15,000 now costs more than double at Rs.35,000.
A senior Inland Revenue official explained the complexity of the tax formula: “Taxes on taxes—such as Value-Added Tax (VAT) and the Port and Airport Development Levy (PAL)—amplify the impact of even minor increases in customs duties. Doubling a 15 per cent customs duty to 30 per cent can result in a disproportionately higher final tax burden on consumers.” Despite these challenges, the tile sector provides significant revenue. According to the Sri Lanka Customs Statistics, the sector contributes approximately Rs. 1.35 billion monthly (Rs. 16.2 billion annually).
Mr. Vigneshwaran argued that this revenue offsets the foreign exchange spent on imports, negating claims of an economic drain from this sector.
Stakeholders have likened the dominance of two local tile manufacturers to the infamous “sugar and rice mafias”. These manufacturers reportedly thrived during the import ban, reaping profits while consumers and small businesses bore the brunt of inflated prices.
The Condominium Developers Association of Sri Lanka (CDASL) has expressed alarm over the economic fallout of these protectionist policies. Increased construction costs threaten to make affordable housing—a key driver of inclusive growth—unattainable.
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