Colombo (LNW): The Tea Exporters Association (TEA) has expressed serious concerns over the introduction of an 18 per cent Value Added Tax (VAT) on the Sri Lankan tea industry, effective January 1, 2024.
Previously exempt from VAT, the industry now faces challenges, especially given that over 90 per cent of its production is intended for export.
The TEA urged the Finance Ministry and Inland Revenue Department to establish a mechanism for timely VAT registration for all tea manufacturers to prevent disruptions in the tea supply chain.
The industry, with its unique structure, involving smallholder farmers, regional plantation companies, tea manufacturers, exporters, and brokers, emphasised the need for better consultation with stakeholders before implementing such changes to sustain in the challenging global environment.
The TEA warns of potential administrative challenges and additional costs if all 600 tea factories are required to register for VAT and Simplified Value Added Tax (SVAT).
The industry stakeholders have requested more time for registration and proposed brokers as contact points for invoicing to ease communication with the IRD.
The TEA noted the skepticism surrounding the ability of tea factories to complete VAT/SVAT registration before January 1, potentially impacting the first tea auction of 2024 and tea exports, along with potential effects on smallholder farmers and foreign buyers.
The government gazette notification includes green leaves under VAT, but the industry seeks assurance that they may not be liable for VAT payment, considering them basic agricultural raw material.
