Govt. on course to legislate Special Goods and Services Tax

• Advices Legal Draftsman to prepare draft law
• To be presented to P’ment in a few months after gazette issued  
• The tax expected to rationalise various taxes into one
• To facilitate tax administration as well as collection

Making good on the proposal made in the Budget 2021, the government is gearing to introduce the ‘Special Goods and Services Tax,’ which will rationalise various taxes into one, while easing tax administration as well as collection. 

To this end, the government has advised the Legal Draftsman to prepare, ‘the Goods and Services Tax Bill,’ which will be gazetted and presented to Parliament in a few months. 
“Under the provisions of the proposed new Act, it is expected to simplify the Goods and Services Tax related to liquor, cigarettes, vehicles and communication and betting,” the government said. 

The proposed tax is the centerpiece in the entire budget presented last November for 2021. The budget was widely hailed by the private sector for its consistency in tax policy set forth by the government in December 2019 due to absence of tax surprise— a key deviation from previous Sri Lankan budgets. 

Instead, it gave a sweeping tax concessions and holidays to economic sectors identified as priority areas to nurture them to become globally competitive. 

Doubling down on the government’s medium to long-term commitment towards a stable tax policy, Dr. P.B. Jayasundara, Secretary to the President a few days ago affirmed that the current income tax rates would remain at gazetted rates in the foreseeable future, while the Value Added Tax would remain at 8 percent. 

While there will be no new taxes, he said there would be some rationalisation in Customs taxes, while improving the overall efficiency in tax administration.

This could be music to the ears of businesses and the investors alike, as they prefer consistency and predictability in State policies over any other thing. 

It was only a fortnight ago that Mahendra Jayasekara, Managing Director of Lanka Wall Tiles PLC and Lanka Tiles PLC echoed similar sentiments.  
“Generally investors prefer consistent bad policies to inconsistent good policies,” he stressed. 

Sri Lanka pursues the strategy of raking in higher tax income through lower rates as such policy will not only support business and improve consumer spending, but also could enhance tax compliance while reducing tax evasion. 

For a country which is desperately attempting to rebuild its industrial base destroyed by easy imports for four decades, lower taxes for a prolonged period is imperative because Sri Lanka can never have the scale advantage to compete with manufacturing giants such as China and India.