The government presently runs a two-tier tax system where provincial councils charges a 1 percent Turnover Tax (TT) while the Inland Revenue charges a 12.5 percent Goods & Service Tax (GST).
rnrnThe chamber is proposing the government broadbase GST to cover all activities ranging from production distribution chain right through to the consumer and eliminate TT payable to the provincial councils.
rnrnIn theory, GST pre-empts a price cascade, supports specialisation, minimises economic distortions and due to its self-policing features acts as a deterrent to tax evasion.
rnrnThe present system used in Sri Lanka does not foster the desired economic benefits of a Value Added Tax System, the Chamber notes.
rnrnUnder the present system it is difficult to harmonise indirect taxes within the GST system due to the continuation of TT on certain sectors, National Security Levy (NSL), Excise Duty; Levies under Excise Special Provisions Law, the Chamber says.
rnrnTo compound matters, a GST inclusive price is used