COPF calls for review of VAT changes impacting medical, agricultural sectors

The Committee on Public Finance (COPF), at a recent meeting, requested the Ministry of Finance to consider VAT exemptions for medical equipment, ambulances, high-protein agro foods for children, and agricultural items.

The Committee made that request in respect of the Value Added Tax (Amendment) Bill, The Finance Bill amending the Finance Act, No. 35 of 2018 and the Finance Act, No. 12 of 2012, and the Imports and Exports Control Act related to Gazette No. 2353/16.

The Committee questioned the rationale behind including VAT for agricultural items, which will impact the domestic agricultural and food industry.An official representing the Ministry of Finance stated that agricultural machinery and other equipment, including chemical fertilizer previously listed as exempted, will now be liable for VAT under the said Bill. Finance ministry officials added that dairy products such as liquid milk and eggs will also be subject to VAT.

However, agricultural seeds, agricultural plants, shrimp feed including prawn feed, and animal feed excluding poultry feed will be exempted from VAT. Wheat, wheat flour or powdered milk, pharmaceutical products, and drugs will also be exempted.

The Committee highlighted products made from grains cultivated in Sri Lanka, identified as high-protein and high-energy agro foods, are now subjected to VAT at a time when child malnourishment is considered to be on the rise.

The Committee also questioned why ambulances and medical equipment are being subjected to VAT.

After thoroughly examining the Value Added Tax (Amendment) Bill, the Committee granted approval, contingent upon the Ministry of Finance incorporating the proposed amendments by the Committee on Public Finance, provided they are in agreement.

However, the Committee urged the officials to reassess VAT exemptions for medical equipment, ambulances, fertiliser, and food products derived from grains classified as high-protein agro foods and agricultural items.

The Committee on Public Finance further revealed that the elimination of VAT exemptions will not impact the fares of UBER and PickME. Dr. Harsha de Silva, the Committee Chair, emphasised that as UBER and PickME have included VAT since their inception, contrary to other beliefs, the proposed VAT changes will only result in a 3% rise without significantly affecting the ultimate fare that customers are required to pay.

The Committee on Public Finance also considered the Finance Bill amending the Finance Act, No. 35 of 2018 and the Finance Act, No. 12 of 2012, which proposes provisions to release motor vehicles imported into Sri Lanka that were not cleared from customs due to import restrictions or non-payment of taxes.

However, given the matters arising from importing and opening LCs post the suspension of motor vehicle imports by Gazette Extraordinary No. 2176/19 dated May 22, 2020, under the Import and Export Control Act, the Committee Chair instructed the Ministry of Finance to submit a report on the provisions to release 119 imported vehicles yet to be cleared from customs. The Committee thus decided to reconsider the said from thereon.

Moreover, following the consideration of the Imports and Exports Control Act related to Gazette No. 2353/16, the Committee approved the said.

State Ministers Shehan Semasinghe, (Dr.) Suren Raghavan, Members of Parliament Patali Champika Ranawaka, Nimal Lanza, Isuru Dodangoda, Madhura Withanage, Mahindananda Aluthgamage, Wajira Abeywardena, and Harshana Rajakaruna, were present at the Committee meeting held.