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Asian Tribune is published by World Institute For Asian Studies|Powered by WIAS Vol. 12 No. 2343

More than Rs. 2 billion VAT Refunds due to importers and exporters

By Quintus Perera – Asian Tribune

While important export crop dealers such as tea, coconut and rubber exporters complain that the cess collected on the exports of these crops, to be used to improve and develop those industries are being used for other purposes by the government the importers and exporters are now crying that the Inland Revenue Department inordinately delays the refund of VAT and according to them the long overdue amount is over rupees two billion.

To deliberate and iron out the problems facing the industry and to try to help fast track VAT refunds, The Academy for International Trade and Transport, the Training Arm of the Sri Lanka Freight Forwarders Association and the Sri Lanka Shippers’ Council two affiliated bodies of the Ceylon Chamber of Commerce are organizing an important workshop/seminar on June 7th at the Bandaranaike Centre for International Studies.

VAT refund is one of the major crises that the Sri Lanka’s Import/ Export industry is currently facing. Major delays in obtaining refunds are sighted by the industry and as a result most of the smaller companies are facing difficulties in their day to day working capital requirements.

Rohan Masakorala, past President, Sri Lanka Shippers Council one of the resource persons at the seminar said that due to the delays of obtaining refunds while facing difficulties in the day today working capital requirements the borrowing costs are also on the high side with interest rates climbing up as monitory policy makers fight rising inflation.

He said that due to VAT refund delays, exporters are forced to borrow at these high costs to finance production and maintain sufficient cash flow and thus fail to meet export growth targets. At a time when Sri Lankan exporters are also facing up to 15%-20% transaction cost on their FOB values, due to impediments on e-commerce and outdated traction systems and poor infrastructure, Masakorala is pessimistic of achieving double digit export growth as near impossibility in the long run.

He said that this vulnerability has arisen due to VAT refund delays and they are virtually indirect barriers for export growth.

He said that, however in the recent past certain industries like the apparel sector have had lesser impact on VAT since they have also been exempted on VAT on services and are registered on the 15 day refund scheme. Yet they too are getting the VAT after about 2-3 months from the lodgment date. Majority of exporters does not enjoy this benefit but have to wait for anything between 8-12 months to get the refunds.

Masakorala said that the Inland Revenue Department has informed the industry that they would try to finish off the current back log of VAT refunds which is estimated to be Rs 2Bn+ by October 2007.The same has been said by the secretary to the treasury.

He said that one of the major problems sighted by the department is a shortage of trained staff until January 2007 and now they have recruited new staff to clear the back log. This is welcome news but in the meantime it is important to iron out errors and unwanted bureaucracy in the system and at the same time errors made by the applicants when lodging claims with IRD.

The IRD has also pointed out that delays due to knowledge gaps among the VAT lodging companies and the relevant procedures etc are also a major contributor for the delays as they have to go through these documents over and over again to verify manually before releasing payments.

Some of these technical issues can be easily overcome if the industry people know exactly how the process works and how things could go wrong. In that context the Academy for International Trade and Transport, the training arm of the Sri Lanka Freight Forwarders Association and the Sri Lanka Shippers’ Council is organising the seminar.

This seminar will bring substantial benefits to the participants and their respective companies. As topics relating to documentation on VAT and lodgment process will be discussed by the Senior Deputy Commissioner VAT Department, Deputy Commissioner VAT Department, a senior officer from the Sri Lanka Customs Department and industry experts from the Exporters’ Association of Sri Lanka and the National Chamber of Exporters will preside at this seminar.

Also participants will have a chance to bring their particular areas of problems and to get advice on how to overcome issues and to obtain faster refunds.

- Asian Tribune -

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