By: Staff Writer
Colombo (LNW): The Tea Exporters Association (TEA) yesterday expressed concern over the Government’s move to bring the commodity under the 18% Value Added Tax (VAT) from 1 January 2024 as opposed to being exempted.
“While it is understood that in order to resurrect the country’s financial stability, we have to widen the tax net and the VAT, the high VAT on a commodity of which over 90% is produced and sold purely for exports, wherein all of the VAT will need to be refunded to stay competitive in the world market, the imposition of VAT on tea has caused grave concern amongst the industry,” TEA said in a statement.
It said the tea industry value chain involves a number of stakeholders; over 400,000 tea smallholder farmers who account for over 70% of the tea production, 21 regional plantation companies, about 600 tea manufactures who are the sellers of tea as well, over 300 tea exporters/buyers and eight brokers who conduct the weekly tea auction.
TEA said, at present only tea exporters are registered for VAT and SVAT but according to the new VAT Bill that was approved by the parliament a few days ago, the 600 tea producers/factories in the tea industry should get themselves registered for VAT and SVAT to be eligible to issue of VAT invoices to the buyers of tea.
Instead of the current system where the exporters/buyers are dealing with eight brokers, in future the exporters will have to deal with about 600 tea factories that may create huge administrative challenges including additional cost.
Each weekly tea auction sells between five to six million kg of tea divided into about 10,000 lots or different types and grades of teas. Buyers are required to settle the full value of tea within seven days from date of purchase to ensure that tea farmers/growers get their payment without any delay.
On behalf of the tea manufacturers/sellers the invoices are issued by the eight brokers only making it very much convenient for both sellers and buyers in respect of administering the weekly tea selling and buying.
This transparent system has been there for over 125 years and secured the best possible prices for Ceylon Tea that enable the country to receive about $ 1.3 billion of foreign exchange from tea exports annually.
The industry stakeholders under the umbrella body of Colombo Tea Traders Association has made a submission to the Plantation Minister and to State Minister of Finance and Commissioner General of Inland Revenue last week requesting for more time for registration of tea factories for VAT and SVAT as it may be impossible to register all of them by 1 January 2024.
They have also requested to allow the brokers to be the contact point for issue of invoices for easy communication between IRD and the producers.
