Stage set to launch Special GST
The Government is ready to introduce the Special Goods and Services Tax (SGST) in a major reform of the country’s taxation by enacting the new GST bill in parliament soon after its approval by the Cabinet of Ministers, a senior Treasury official divulged.
The new draft bill now being finalised by the Legal Draftsman’s Department will be presented to the cabinet with the endorsement of the Attorney General within two weeks, Treasury Secretary S.R. Attygalle told the Business Times.
Cabinet has already endorsed a proposal to draft a new Goods and Services Tax (GST) bill, which is aimed at simplifying taxes on alcohol, cigarettes, vehicles, telecommunications and betting.
The new SGST proposed in Budget 2021 will improve the efficiency of tax collection with the introduction of an online-managed single tax which contributes considerably to state revenue, he added.
The proposed tax will make revenue collection easy for the Excise Department removing the burden and time consuming process of collecting taxes and levies from 17 hard liquor manufacturers and two beer producers.
The Finance Ministry was working to have the SGST ready for implementation from the new tax year (April 2021) but it was delayed due to unavoidable circumstances.
Therefore the new SGST will be enforced with retrospective effect, a senior Inland Revenue Department (IRD) official explained. Earlier the IRD had to reduce taxes on alcohol, tobacco, and gambling, manufacturing and financial industries from April 1, 2020 in accordance with the government’s new taxation policy, he added.
Revenue from liquor, tobacco, and gambling, which were previously taxed at 40 percent, will now be charged at 28 percent.
Trading, banking, finance and insurance will be taxed at 24 percent, compared to the previous 28 percent.
Manufacturing will be taxed at a new rate of 18 percent, down from the earlier rate of 28 percent.
Excise duty revenue generated from Excise duty declined by 12.8 percent to Rs. 111.3 billion in the first four months of 2021, compared to Rs. 127.6 billion in the same period of 2020, Finance Ministry data showed.
This was mainly due to the decline of revenue from motor vehicles, cigarettes and petroleum products despite the gains in revenue from liquor and other excisable articles.
Excise duty revenue accounted for 26 percent of the tax revenue and 23.1 percent of the total revenue collected in the first four months of 2021 while achieving 23.4 percent of the annual estimate, ministry data revealed.