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| Friday, 2 August 2002 |
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Finance Minister K.N. Choksy yesterday urged the public not to be misled by the attempts of the Opposition to belittle the Government's efforts to bring down the cost of living by trying to create a negative picture about the newly introduced Value Added Tax (VAT). He told the media that the VAT was introduced with the primary objective of bringing down cost of living by doing away with the GST and the NSL. The prices of essential commodities and imports would now come down considerably. "From the time the UNF came into power we adopted progressive measures to bring down the cost of living despite having a very difficult revenue position. In our budget proposals we reduced the 40 per cent customs duty surcharge to 20 per cent. We also brought down interest rates of the banks. Recently the Ceylon Petroleum Corporation did away with the Loss Recovery Charge on diesel and petrol. Earlier several goods and services were subjected to both 12.5 per cent GST and 6.5 per cent National Security Levy (NSL). Among them were essential commodities such as rice, rice flour, wheat, wheat flour, bread, infant milk, pharmaceutical products and medical equipment," the Minister said. Deputy Finance Minister Bandula Gunawardana said the Government has to sacrifice a considerable amount of revenue in terms of tax with the introduction of VAT. "We import a large number of essential commodities and other items. Today with the introduction of VAT importers do not have to pay GST or NSL. The 40 per cent import duty surcharge was reduced to 20 per cent and the Customs do not impose 25 per cent mark up on items. We even removed the one per cent stamp duty on Letters of Credit. Therefore, the cost of imports should come down considerably. There is no way that VAT could increase the cost of imports," Minster said. Importers of motor vehicles believe that the prices of reconditioned vehicles could come down considerably. The Chairman of Reconditioned Motor Vehicles Importers Association, Berty Vidanagamage said the prices of commercial vehicles including buses and trucks will come down. "Usually we had to pay about Rs. 150,000 to the Customs when importing a four to five year old truck or a bus. But following the introduction of VAT we expect the Customs duty on such vehicles to come down from Rs. 15,000 to 25,000. The prices of cars too will come down considerably. For example, the Customs duty when importing a reconditioned Toyota Corolla car is expected to go down by Rs. 145,000," Mr. Vidanagamage said. The Motorcycle Importers Association Chairman Siri Udawatta said VAT would immensely benefit the importers of motor cycles as well as the users. "The majority of the motorcycle users are middle and low income earners and they will be able to purchase these vehicles at drastically reduced prices. The reconditioned motorcycle industry had been going through a difficult time. We were only importing about 3,000 motor cycles per month, which was inadequate. It was mainly due to the increased Cost in Freight rates and the price increases in Japan," Udawatte said. A representative of the Maradagahamula Rice Wholesale Marketing Centre said the introduction of VAT will enable them to purchase rice from farmers leaving them considerable profit margins and at the same time sell to consumers at reasonable prices. New Zealand Milk Lanka Limited said there will be no change in Anchor and Ratthi brand full cream milk powder prices, although VAT is applicable on their products. "These products were earlier exempt from GST but will be taxed 10% VAT. Since there is no NSL (6.5%) now, there is an effective increase of 3.5%. But we will not pass that on to the consumer," a spokesman for the company said. The KFC restaurant chain has also reduced its prices by 5 per cent to 20 per cent from yesterday, Cargills Ceylon Limited said. |
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