Local tea market will pay 15 % VAT for buying at the auctions

The Inland Revenue Department made Value Added Taxes (VAT) payments mandatory on all teas brought for the local market at the weekly auctions.

The Inland Revenue Department made Value Added Taxes (VAT) payments mandatory on all teas brought for the local market at the weekly auctions. The tax was slapped on beginning at this week’s auction, to the dismay of local buyers, Asia Siyaka Commodity Brokers said.

The new practice moves away from an earlier norm where only firms buying over 500,000 kilograms a quarter or over 1.8 million kilograms a year was liable to pay the tax.

The tea brokers were liable to furnish sales information every month, allowing the Department to compute the tax liabilities.

But with local firms working around the law to avoid the tax, Inland Revenue officials made the tax compulsory with exemptions, if any, only given to VAT resisted buyers, the Ceylon tea Traders Association said on Thursday.

Buyers for the local market at this week’s dust tea auction however had to pay the 15 percent tax on top of the knockdown price (price at the fall of the hammer at the auction)

Buyers registered as exporters and traders with VAT registration had the tax component suspended, Asia Siyaka said.

Industry sources say, the tax will be pushed down to the consumer, with most buyers for the local market also unlikely to register with the Inland Revenue or apply for exemptions.

The move falls in with the Government’s hope to up government revenue to Rs. 389 billion to fund badly needed public infrastructure investments.

The Government had earlier hinted that it would cut down on tax exemptions, introducing new taxes and strengthening tax administration, to increase revenues, with some of the necessary proposals included in the 2005 Budget.

Officially, some 5 percent to 6 percent of total production is consumed locally, but unofficial sales add another 5 percent to the pot.

Dust teas average between Rs. 70 and Rs. 240 per kilo for better teas.

-LBO Newsdesk: lboemail@vanguardlanka.com