Political

Govt removes 15% diesel VAT

BY Uditha Kumarasinghe and Manjula Fernando

THE Government has decided to remove the 15 per cent Value Added Tax (VAT) imposed on diesel with immediate effect.

The Cabinet has approved a memorandum submitted by Finance and Planning Minister Dr. Sarath Amunugama in this regard.

"Increasing diesel prices has had a direct bearing on the rise in the cost of living. The Government will remove the 15 per cent VAT on diesel for stabilising diesel prices in the face of galloping world fuel prices," Dr.Amunugama told the Cabinet press briefing yesterday.

The Minister also stressed that with the removal of the diesel VAT, there would be no need for private bus owners to increase their bus fares whenever there is a hike in world fuel prices.

However, if there is a steep increase in world fuel prices the Government will be compelled to seek other alternative avenues to offset the losses, he said.

Dr. Amunugama stressed that with the removal of VAT, the Government stands to lose Rs.7 billion. In order to keep the diesel prices stable, the Government will continue with the subsidy granted to Ceylon Petroleum Corporation and the Indian Oil Company (IOC).

Through this measure, the Government intends to maintain stable diesel prices in the wake of an immediate fuel increase in the world market.

The Minister pointed out that world oil prices have risen rapidly with a single oil barrel costing US$ 58 to 60.

"Today the Government has to pay double the price on fuel than at the time it presented the last budget. Escalating fuel prices have directly led to a rise in the cost of living.

Therefore the Government took an immediate decision to remove the 15 per cent VAT on diesel without adding to the burden of consumers grappling with the high cost of living," he said.

Science and Technology Minister Prof. Tissa Vitharana said the removal of the diesel VAT would lead to a reduction in prices of goods.

"The former UNF Government's policy was to increase local fuel prices whenever world fuel prices increased. The Cabinet has rejected this policy followed by the former Government," Vitharana added.

If the present Government too practised this policy, prices of goods, services and transport would have witnessed a rapid increase.

Prof. Vitharana said 64 per cent of the power supply is generated through diesel and thermal power. When diesel prices go up, electricity charges would also automatically increase.

"With the removal of diesel VAT, consumers and industrialists will be able to obtain electricity at low rates," he told the media.