The stakeholders of the fabric and textile industry hailed the government decision to reduce Value Added Tax (VAT) to support the sector.
“We have no issue with regard to the tax reduction. However, we were worried about the cess been removed. The government considered our request and the cess is in place. This will support the industrialists in the long term,” President Local Textile Manufacturing Association Nimal Perera said.
Recalling the past, he said that Sri Lanka had a vibrant textile industry.
“We lost our way due to the removal of duties and the whole industry collapsed. We faced difficulties. However, with the re-imposition of cess in 2006-7 the industry started moving on. The main reason for the re-introduction of cess was to prevent the under-invoicing that was going on. The industry was revived and heavy investments were coming in to the industry which include textile, power loom, knitting, yarn manufacturing, dyeing and finishing,” he said.
The textile imports to the country increased by five folds during the last few years. This was more than the requirement. This disparity and the falling rupee value have a negative impact on the textile imports, he said.
Minister of Finance and Mass Media Mangala Samaraweera considering the request made by the stakeholders in the fabric industry reduced the VAT on imported fabric to 5 percent.
Minister Samaraweera signed the gazette notification last week. Earlier fabric was subjected to Rs. 100/kg cess at the time of imports. The budget 2018 has proposed to impose a 15 percent VAT on goods and the Value Added Tax Act No 14 of 2002 was amended accordingly. The new VAT scheme came in to effect from August 16 2018.
As fabric was also subjected to this 15 percent VAT, the importers, traders and industrialists using fabric as raw material for making ready-made garments appealed to the Minister of Finance to provide them some relief as small scale traders and industrialists who are not covered under VAT Act have been adversely affected.
The Minister made the decision to amend the VAT Act further to reduce the VAT on imported fabric to 5 percent considering the possibility of giving a helping hand to proposed small scale industrialists under the Enterprise Sri Lankan scheme. The Enterprise Sri Lanka, the subsidised loan scheme by the Ministry of Finance and Mass Media has introduced an interest subsidised loan scheme for medium and small scale manufacturing industrialists and they can obtain fabric as raw material at a low cost.