News
Phone calls, many food items to cost more from Jan. 1
The price of voice calls will increase by five per cent, while a range of imports from rice and spices to certain plant and machinery will become costlier when tax revisions in the 2014 Budget come into effect on Wednesday.
But the Government has dropped a proposal to impose additional Nation Building Tax (NBT) or Value Added Tax (VAT) on the local sale of goods that have already been subjected to a Special Commodity Levy (SCL) at the point of import.
These items are imported sprats, chickpeas, green gram, canned fish, sugar, Maldives fish, dried fish and oranges. They also include coriander, cumin seed, fennel, turmeric, black gram flour, groundnuts, mustard seed, palm oil, salt, yoghurt, butter and margarine.
Earlier, the only tax imposed on these goods was the SCL which was collected by the Customs Department. In the 2014 budget, however, the Government had proposed to charge VAT and NBT from those importers who made a turnover of more than Rs. 250 million per quarter on the sale of the items on the local market.
This proposal was dropped last week after post-budget discussions made it clear that there would be a heavy impact on consumers. Nevertheless, prices of these mass consumer items have already risen under a revision of the SCL that came into effect in November.
From Wednesday, the Telecommunications Levy of 20 percent imposed on voice calls will be increased to 25 percent (the tax on internet services remains unchanged at 10 percent). But ties and bows and designer pens will become cheaper when a VAT exemption on their import or supply becomes effective.
In contrast, VAT will be now be charged on the import or supply of paddy, rice, cardamom, cinnamon, cloves, nutmeg, mace, pepper, desiccated coconut, rubber, latex, fresh coconuts, tea (including green leaf), rice flour, bread, eggs and liquid milk. The Government has said that the objective of this revision is to protect local industries.
VAT is also payable on agricultural or road tractors for semi-trailers; machinery and equipment for the tea and rubber industry; machinery for modernisation of factories by the factory owner; other plant and machinery; and certain categories of pharmaceutical preparations.
Imports that have been exempted from VAT—and will therefore become cheaper—are copper cables for the telecommunications industry; the supply of gully bowsers and semi-trailers for road tractors; any machinery or equipment used for garbage disposal activities; and garbage disposal trucks.
The import or supply of frozen bait, fish hooks, rods, reels and fishing tackle as well as marine propulsion engines will be exempt from VAT. But any person or partnership carrying on wholesale and retail trade with a turnover of more than Rs. 250 million per quarter will now have to pay VAT. The earlier threshold was Rs. 500 million. The shift will result in medium-scale businessmen or partnerships being drawn into the VAT net.
There will also be changes to the NBT regime. For instance, the retail trade of goods at duty free shops for payment in foreign currency will be exempt from NBT. Also exempted, for a period of three years starting January 1, 2014, is the sale of locally manufactured coconut oil by the manufacturer; the distribution of LP gas; and services provided at any airport for payments in foreign currency.
But the imposition of NBT (at the rate of two percent of gross turnover) is to be extended to the business of banking and finance. The importation of certain categories of tractors will be liable for NBT while the sale of locally manufactured tractors will remain unchanged.
While certain changes were proposed on the payment of taxes by the pharmaceutical industry, post-Budget discussions are ongoing in this regard.