Electricity, water and drugs to be exempt from VAT increase***

Essential items including electricity, water rates and pharmaceuticals are to be exempt from the proposed VAT increase from May 1, to ease the burden on consumers, it was decided on Wednesday at a meeting chaired by President Maithripala Sirisena in Colombo.

The emergency meeting was called after contrasting views emerged in the government over increasing the Value Added Tax (VAT) to 15 per cent from 8-12 per cent earlier. The meeting attended by Prime Minister Ranil Wickremasinghe and senior UNP ministers also drew attention to other tax increases. It was decided that other essential commodities would also be untouched by the tax hike. No details were immediately available as to what the other exempted items would be.

The meeting was called after the Prime Minister and the President appeared to take contradictory positions on the imposition of VAT on consumer essentials. The reversal on VAT raises questions about the proposed balance of payments support from the IMF. The fund has stated that a new facility wil be made available if a government programme of raising revenue from taxes, cutting expenditure and lead management in the state sector is in place. - (Bandula)