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Apparel body welcomes Suspended-VAT scheme
May '11
The 'Simplified Suspended-VAT' scheme to be implemented by the Sri Lankan Government aims to achieve the export objectives of a value-added economy, according to Mr. Tuli Cooray, Secretary General, Joint Apparel Association Forum (JAAF).

Addressing the members from the apparel sector at a seminar, Mr. Cooray lauded the Government's decision to introduce a suspended-VAT scheme for local suppliers. He termed the scheme as “one of the most outstanding trade facilitation measures introduced by the Government.”

He said that it is an essential prerequisite for creating value added exports. Any company - irrespective of whether it is an exporter, indirect exporter, or a value-added service provider – if it proves to the satisfaction of the Commissioner General of Inland Revenue that it is exporting more than 51 percent of its turnover, directly or indirectly, then it can procure any local input on a Suspended-VAT basis without paying VAT.

All suppliers who supply to such eligible companies have to register themselves with the Department of Inland Revenue. A supplier can be a purchaser or vice-versa depending on the volume of exports, either direct or indirect.

The importance of the scheme lies in the fact that all export suppliers as well as purchasers are brought under it. Simultaneously, the VAT system removes cash flow burden from both the export industry and the Government. It even minimizes the chances of fraudulent activity concerning supplies to export sector.

The success of suspended- VAT will, however, depend on the ability of the industry to be compliant with the system and the ability of the Department of Inland Revenue (DIR) to effectively monitor.

For the purpose, the DIR is expected to implement electronic documentation in a progressive manner.

Under the current VAT system, exports were zero-rated and hence VAT on input is refunded to the exporters, whose money is blocked for a certain time. The new suspended-VAT system is better as it exempts from paying VAT in the first instance and hence, the question of refund does not arise. It would also save a lot of time and energy.

Fibre2fashion News Desk - India

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