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Thu, 23 October 2014 06:37:02
Sri Lanka extends value added tax to retail trade
08 Nov, 2012 17:18:20
Nov 08, 2012 (LBO) - Sri Lanka has extended value added tax to the retail trade starting with supermarkets with a turnover above 500 million rupees a quarter, President Mahinda Rajapaksa said presenting a budget for 2012.
A so-called non recoverable nation building tax will also be charged from supermarkets.

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.

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READER COMMENT(S)
7. Super Market Manager Dec 26
With this tax whole modern retailing in this country will collapse very quickly. I am working for well known , blue chip supermarket chain in this country. 98% of our products contain maximum retail price(MRP). Which is same Game kade to lager shopping mall. But after VAT imposed MRP will no longer in the majority of the products.

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.

6. Shopper Nov 10
Fb, so you mean to say POS girls use their brain ? i can actually think a sales guy at a boutique using brains and giving some discounts to frequent customers but a sales girl at a supermarket ?>?>?>>><
5. Shopper Nov 10
Fb, you seems to never shop. so no point talking, do u know fresh stuff are the main driver of people into super markets. not it is becomming fashionable and cheap to shop them at small shops......they are also adding in other stuff gradually. back to mini concept. besides super markets are no longer a fashionable place to shop like it used to be sometime ago.........
4. fb Nov 09
On the contrary the small retailer disappearing is very good for the economy. The so-called supermarket girls phenomenon had resulted improved living standards for them.

They work in air conditioned place of work, stocking up, running POS units etc using their brains.

Compared to the boys working in a little shop with no a/c long hours getting scolded by the shop keeper (most of the shop boys in Colombo come from the estates)supermarkets are much better. If the rulers did not raise taxes on motorbike to this level, all these girl like in East Asia would be coming to work in scooters.

Rulers 'alleviate' poverty by taking taxes with the use of police power and re-distributing it to others like unemployable graduates or Samurdhi or whatever.

When things are done without rulers help and they can get no credit, the rulers hit them with taxes.

But the issue is not workers. The issue is more the customer and the general welfare of the citizen. Supermarket from time to time sell below the 'maximum retail price.'

Grocery shops are a thing of the past. Fruit shops, veggie shops, fish retail shops, mobile phone shops, clothes boutiques, photocopy places are in.

Economies cannot grow without change. Or on the orders and wisher of the state the rulers, the finance ministry or the preference of someone who wants to impose their will on others - that is just a power trip. Economies should grow by free will by people - customers, employees - who make decision by their own free will because it is advantageous for them to do so.

Solving traffic is a different problem. Roads are built for the benefit of people, to do among other thing - shop. People do not have to live for traffic. It has to be the other way around - if this was a free country.

3. shopper Nov 09
At this rate the supermarkets are invading all junctions (and causing traffic congestion) it good to keep some pause on them......otherwise small time retailers will dissappear which is not good for the economy.
2. kukumarx Nov 09
No it will be more. Lots of items like vegetables are not charged VAT. So there will be no input VAT to offset some of the output VAT. So people like Cargills who are setting up supply chains for vegetables (something the Govt tried to do through the Marketing Dept for years) will have to pay the entire 12% VAT on products like vegetables. This will make them more expensive than the Manning market mudalali (who the govt has for years accused of exploiting the poor vegetable grower).

A very contradictory step in the budget.

1. gunathunkamm Nov 08
This is the craziest tax proposal even heard of. ssume supermarkets keep 35% margin. You will be paying 4.2% more for your groceries, if the VAT rate is 12% and much more if its 20%