PTFOA wants VAT on tea removed

BY HIRAN H. Senewiratne

THE Private Tea Factory Owners' Association (PTFOA) requests the Government to remove the Value Added Tax (VAT) on tea, for the smooth function of the industry, which is fighting for its survival.

Earlier tea was in the zero VAT rate list and money that has been spent on all inputs by tea factories such as electricity, fuel and many more were claimed from the Government, PTFOA President Amara Dissanayake told the Daily News.

With the introduction of the VAT on tea, it has increased the cost of production in most tea factories, he said. This has resulted in high competition in the export market for many factory owners.

'We have requested the Government to consider this issue but no action has been taken to revert to the original status to face future challenges in the industry. The factory owners have to pay additional 15 per cent, which is difficult to meet for us,' he said.

Dissanayake also said that tea smallholders contribute 60 per cent of the total tea production and they are a force to be reckoned with. It is also said that more than 300,000 families are totally dependant on the industry, he said.

According to Dissanayake out of the total turnover 68 per cent have to be spent for the manufacturing of tea and the balance is the revenue for the company.

The Government has imposed an Economic Service Charge (ESC) of 1 per cent of the total turnover on up-front, which is unreasonable. He requested the Government to impose tax on the revenue that is 32 per cent of the total turnover.

Dissanayake said that the Ministry of Plantation Industries and the Tea Board of Sri Lanka were supportive of all these demands.'

Even all stakeholders in the industry including exporters, tea manufacturers, auctioneers signed a Memorandum of Understanding with us to forward this issue to the Government,'he said.

This situation prevents all factory owners to upgrade their factories to enter European markets after 2006.

It is said that to enter those markets all factories are required to obtain the HACCP health certificate and ISO certificates, which would be considered a mandatory requirement.

Nevertheless most of the tea producing countries such as Kenya, Turkey, China and Bangladesh enter into the business in a big way, which will affect the local tea sector under the business in circumstances, he said.