Teabag export tax rescinds

EXEMPTION: The Government has exempted from income tax, the profits derived from teabag exports in order to promote investment in the tea bagging sector of the tea industry.

Presently, the profits from teabag exports are taxed at the rate of 15 percent. This has been removed from April 1, 2006.

The average export price of teabags is around Rs. 545 per kilogramme as against the average export price of bulk tea of Rs. 222 per kilogramme.

This huge gap shows the potential that exists for more foreign exchange by converting bulk tea exports into value-added teabag exports.

Presently only 18 million kilograms of tea, out of the total 300 million kilograms, are channelled to the export market in the form of teabags.

On the recommendation made by the Export Cluster of the National Council for Economic Development, the Secretary to the Treasury has exempted income tax on profits from teabags. The profits derived from processing of other primary agricultural produce have been already exempted from income tax in the last Budget proposal.

The business community has welcomed the government's initiative.

Chairman, M.J.F. Group of Companies Meril. J. Fernando, said "the decision of the Ministry of Finance to extend tax free status to exports of pure Ceylon teabags is commendable.