The Sunday Times on the Web Plus
26th April 1998

Front Page|
Editorial/Opinion| Business| Sports |
Mirror Magazine

Front Page
Mirror Magazine

Presented on the World Wide Web by Infomation Laboratories (Pvt.) Ltd.

Gst: darkness at noon

The Goods and Services Tax (GST) imposed last month has left the consumer in the dark regarding price fluctuations, while allowing traders to make extortionate profits. Tharuka Dissanaike and Chamintha Thilakarathne report

It was only when Ms. Perera walked to the corner shop, that she knew of the new tax. “GST, GST,” the mudalai informed her smoothly when she gasped at the increased price of onions.

Grumbling but doing little else she paid the extra money and took her onions home. Why fight over a measly Rs. 4? And after all, whom can you complain to?

On April 1, when the new tax scheme was introduced, the public were largely unaware of its intricacies. And as predicted, unscrupulous businessmen made the most of the confusion.

Why not make hay while the sun shines?

A Deputy Commissioner of Inland Revenue was quoted in a daily newspaper saying that many traders have not yet understood the pricing system, or are deliberately ignoring the correct method for one where the consumer is charged extra. The profit, of course will only fatten traders’own pockets, not the coffers of the Inland Revenue.

GST, in theory should lessen prices of most consumer goods. “True,” said Financial Controller, Ceylon Brewery, Ajith Weeratunga.

“We were paying an 18 percent turnover tax earlier and now it is the standard 12.5 percent GST. This should help us to bring the prices down.”

“But we must study the market conditions and see how the new tax structure affects our network of distributors and wholesalers. When we do make a price revision it will a strategic move, not just based on the new tax,” he said.

Bhairaha Farms said that the price of chicken should be reduced since livestock is exempt from taxation. But unfortunately now chicken feed is taxed under GST. So feed has become more expensive.

“Yes, there will be a small reduction,” said Feroze Noon of Bhairaha Farms, but this tax system could adversely affect the small time farmers who will not be able to sell chicken at competitive prices.

Decreases, if at all, were subtle and marginal. But increases in a number of products were almost immediate. At a Nugegoda grocery our reporter was charged Rs. 12.50 extra for a 100 rupee phone card. Cakes and pastries at outlets, like Fab and Green Cabin have gone up by 12.5 percent.

A glass of Coca Cola at a restaurant outlet at Majestic City earlier sold at Rs.15 is now Rs. 16. In certain bars and wine stores the 12.5 GST has been added onto the existing BTT and prices have doubled.

School fees of private schools are also subjected to GST, immediately increasing them by 12.5 per cent.

Most medicines, other than those locally manufactured have increased in price. Garages charge GST on their bills, studios add GST on their bills for selling and/or developing film, some supermarkets state on their bills- “GST included.”

“Only goods that we import directly, like the liquor comes under GST. Since local buying and selling operations are not taxed under GST, the supermarket prices have not been affected,” said the Cargills Finance Manager.

“We only pay a 1 percent BTT”. Keells Supermarkets said that although they are not registered for GST, some suppliers have hinted at price increases. They expect some of the locally produced items like soap, detergents, processed meats etc. to increase in the future.

GST: darkness at noonThe Marketing manager of Pugoda Textiles said that their materials will have to be increased because they are now registered for GST where as earlier they did not pay tax.

“It will only be a marginal increase in the price per metre. If we increase by Rs. 5-6, we will lose competitive edge in the face of imported textiles flooding the market. So the company will absorb most part of the tax and minimise the price increase,” he said.

Although most large companies were quite ready to explain their position regarding GST and the retail prices of their products, from a layman’s point of view, nothing was really explained. Why is it that shop A sells their previously Rs. 190 cake at Rs. 213.75 and Shop B, equally high profile has not increased their prices ?

“My club charged me GST on the use of the badminton court,” an irate businessman said.

“The problem is, few have understood GST,” Samansiri, a hardware shop owner said. “I am not registered for GST. Some of my suppliers say that they will have to increase prices, but even they are not sure how much or even why they have to.”

“How can we argue, if we ourselves are in the dark ?” asks Prithi de Silva, a housewife. “I do all the marketing and shopping and the diverse responses I get from shop owners has my head spinning. I feel that I am being cheated sometimes, but I really would not know.”

Deputy Commissioner, Inland Revenue, D. Guruge agrees that there has been a lapse in educating the public on GST.

The focus of the Inland Revenue Department, he said, was the tax payer, the companies which would eventually pay the GST. The Department conducted numerous seminars and educational programmes to meet this end and ‘we have been most successful, I think,’ Guruge said.

But the weak point was that in the process the public were left groping in the dark, at the mercy of traders who themselves were hardly educated on the finer points of the tax.

“But the burden of educating the public is not the job of the Inland Revenue Department. That should have been tackled by the Fair Trading Commission or the Central Bank,” Guruge said.

He said that various complaints of overpricing have been brought to the notice of the IRD. It happens through ignorance of the trader, who may not be fully aware that he does not have to pay the tax, or by deliberate cheating, by not being registered for GST or by charging GST over BTT.

“It is a serious problem and has to be addressed,” Guruge said “Even larger companies have not passed down the benefit of GST to the customer. They use GST to earn a super profit.”

When The Sunday Times contacted the Fair Trading Commission, their telephone lines were out of order.

“Well, the public can complain to the IRD also by writing to the Commissioner, and we can take action against the trader concerned.

But of course we need proof- a bill with clear GST instructions. We are not a price regulating authority,” Guruge said.

He said that the present state of confusion was brought on due to lapses on the part of other regulatory authorities. “We have done our part. The IRD recently published a list of products that were exempt from GST.”

The tax, he said, theoretically should have actually helped consumers by reducing their overall cost of living. But what has now occurred is not in keeping with the theory. It is not too late for the government to wake up to reality and educate the confused public on this new tax, they so high handedly imposed.

Please see also Busisness Section

More Plus * Baby planets on the way

Plus Archive

Front Page| News/Comment| Editorial/Opinion| Business| Sports | Mirror Magazine

Hosted By LAcNet

Please send your comments and suggestions on this web site to

The Sunday Times or to Information Laboratories (Pvt.) Ltd.