The state is expecting to raise 5.2 billion rupees from the tax in 2013.
Value added tax is expected to be a neutral simple tax with minimal exemptions and exports to be zero rated so that citizens only pay a part (usually about 20 percent) of the value added to the state finally.
But the VAT regime has buckled under Sri Lanka's heavy interventionism with a bewildering array of exemptions to many sectors with politically powerful special interest groups and multiple rates.
In the current budget locally made products out of coconut waste, import of bowsers, bulldozers, girders, fire fighting vehicles, road tractors for semi-trailers, raw material for energy saving bulbs have been made exempt from VAT.
Supplies made by the Central Bank, some services of public corporations have also been exempted from tax.A regime that was in office until 2004 also reduced tax transparency by changing the VAT law to hide the tax from ordinary citizens who were not registered to recover it.
There have also been high profile value added tax frauds involving claims based on inflated export values.
But Sri Lanka's inland revenue office had started co-ordinating with customs authorities to assess import volumes match reported exports. A so-called SVAT scheme has also been started to give credit for tax paid at the point of import instead of a refund.
Also Sri Lankan retail sector is running with very low level of gross profits. Almost every times it is lesser than 15%. So after taxation only 3% will remain to cover the all the operational costs. Therefore we have only two run the business with minimum cost or increase prices. First option is impossible because we need minimum of 25 people at run even a smallest supermarket. Not only that we have par 2.5%, Credit card commissions to banks, 1% BTT to governments. Rs.19.40 plus 25% fuel surcharge per unit to LECO.
Most of time supermarket make their profits by agreements with suppliers. Usually we are getting additional margins for bulk parches from them. We are sharing these additional income with customer in name of reduced price promotions. Which could not offer by any sathosa of game kade.
At the end supermarket will push in increase their prices. As result people will move away from the supermarkets. Final result would be loss of job so many young boys and girls who came from rural areas if the supermarkets are loss making.
Also the costumers will loose the convinces having a reliable and comfortable shopping experience for their day to day items. Al last Sri Lanka retail will push back several decades back to the era of KALU KADA MUDALALI, bcoz every one getting items with out MRP and they will have freedom to sale at a price as they wanted.
Ultimately customer have to pay the price.