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20 November, 2012 07:50 AM Source: Financial Times - Sri Lanka
Budget 2012.jpg

The supermarket industry is calling for an urgent meeting between the Finance Ministry and all stakeholders over the new taxes on organised large-scale retail trade.

The move is following industry experts pointing out likely snags in implementing the Budget 2013 proposal of imposing Value Added Tax (VAT) on supermarkets and other larger retail or trading businesses.

In Budget 2013, President and Finance Minister Mahinda Rajapaksa said that the 12% VAT would be applied on entities having over Rs. 500 million in turnover per quarter from 1 January 2013.

Supermarket owners have raised serious concerns over the proposal, which will drive away average consumers in addition to eroding margins.

Industry experts point out that it is not possible for the trade to increase their selling prices by 12% from 1 January to recoup additional losses on account of such VAT imposed in respect of stock balances as at 31 December 2012. 

“Therefore, the VAT input embedded in stock as at 31 December 2012 has to be refunded by the Department of Inland Revenue or to be set off against VAT payable with effect from 1 January 2013,” they added. (See table)

It was recalled that a similar situation arose when GST and VAT were introduced on 1 April 1998 and 1 August 2002  respectively, where BTT embedded in stocks as at 31 March 1998 and the Defence Levy embedded in stocks as at 31 July 2002 were refunded (transitional arrangement).

It has been recommended that the standard procedure to obtain VAT input claim by supermarkets, etc. should be as follows. More...

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