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Government to withdraw SGST exploring other tax options 

Thegovernment is withdrawing the special Goods and Services Tax (GST) bill aimed at simplifying the existing tax structure and consolidates several taxes assingle tax following the Supreme Court’s decision of requiring a two-thirdsmajority and referendum to enact it as a law, 

Finance Ministry sources said.Under this circumstance the Finance Ministry has to explore other revenue measures if it has to replace the GST with a tax that would generate the same revenue.Such taxes would be fairer to consumers and small businesses and it would not be a headache for small businesses, and would harmonize tax policies.

Essentially,the alternatives to the GST are as follows: (1) introduce a business transfer tax; (2) introduce a tax on consumption (here defined as income less savings);(3) simplify the GST (eliminate some exemptions; increase the income threshold above which businesses must register) and harmonize it with the provincial sales taxes; (4) replace the GST with a more broadly-based retail sales tax;

 Even to introduce even one of these taxations needs the introduction of a new tax bill which will have to be enacted in parliament following the supreme court determination on its constitutionality.

With  regard to the previous Special GST, the Supreme Court observed that several clauses of the bill are inconsistent with some of the articles of the country’s constitution.

The SpecialGST consolidates several taxes on liquor, cigarettes, telecommunications,betting and gaming and vehicles. 

The Attorney General had cleared the draft law.This legal issue has prompted the Finance Ministry to find an option to re-introduce theSGST and one of the options is to withdraw the tax and allow the previous taxation system with some revisions to relevant taxes to continue, said JointSecretary of the Inland Revenue Service Executive officers’ Association H. A.L. Udayasiri.

The ministry has convened several special meetings to arrive at a decision and it will also seek the legal opinion of the Attorney General on possible options tore-introduce SGST and devising a new bill with necessary amendments.

The Ministryhas made all arrangements to set up a separate revenue collection unit at theTreasury and install the computer system to collect SGST online, he said adding that it has been planned to collect additional revenue of Rs. 50 billion from the new tax by law and changes to the Value Added Tax.

Welcomingthe Supreme Court order, Mr. Udayasiri said that this GST taxation is against the established system and procedure of revenue collection in Sri Lanka.

He noted that the TaxDepartment is responsible for the collection of 54 per cent of total revenue collection in Sri Lanka and taking over its responsibilities and functions oneby one will create a dangerous precedent 

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