<b>Rice, flour, infant milk, etc. cheaper from Aug. 1</b>

Divaina corr. Nilantha Madurawala- The Island

Finance Minister K.N. Choksy said yesterday that prices of rice, flour, infant milk,, pharmaceuticals, bread, spices, kerosene, coconut and coconut oil will get reduced with the Value Added Tax (VAT) coming into effect from August 1.

Choksy addressing a press conference in Colombo said that the 6.5 per cent National Security Levy charged on these items at present will be abolished and there would not be any taxation at all on these goods from August 1.

He said that the 6.5 per cent National Security Levy charged from banks, insurance and leasing services will also be removed.

He said that VAT will be charged under two categories of 10 per cent and 20 per cent.

With the activation of VAT the price of a 15 kilogrammes Shell Gas tank will get increased by 10 per cent. Also a 10 per cent VAT will be charged on every domestic electricity unit exceeding 30 units. Earlier the 12.5 per cent GST was charged on the number of units exceeding 90 units.

Further a 10 per cent VAT will be imposed on milk food (excluding) infant milk, dhal, sugar, juggery, dry fish, water petrol and diesel. Earlier only a 6.5 per cent NSL was charged on these goods. Agricultural tractors, agricultural implements aircraft and helicopters are exempted from VAT.

However Deputy Minister of Finance Bandula Gunawardena said that the prices of these goods are mostly determined by market forces like supply and demand. He said that the only way to reduce prices is to increase production.

He said that the overall electricity bill will not get reduced but the 12.5 per cent GST will be replaced by a 10 per cent VAT.

Minister Gunawardena said that although the NSL is considered to be 6.5 per cent it is not so because with the customs duty on imported goods the NSL actually rises to 8.1 per cent. Therefore the Minister said that by implementing a 10 per cent VAT in place of the NSL will not increase the price of goods considerably, the minister said.

He said that taxes to be paid when importing goods have been reduced by a considerable amount because of the abolition of stamp duty and the reduction of customs duty to 20 per cent. However he said that a price reduction could not be assured due to these changes.

Chairman of the State Pharmaceutical Corporation Sunethra Ranasinghe said that the government would bear a Rs. 20 million loss on pharmaceuticals for which NSL had been paid and reduce the price of pharmaceuticals immediately. She said that the wholesale price of Paracetamol would get reduced by at least 5 per cent under the new tax regime.

-The Island -