SUPREME COURT SUSPENDS VAT INCREASE

Published : 8:08 am  July 12, 2016 | No comments so far |  |  (238) reads | 

Untitled-3The Supreme Court yesterday issued an interim order suspending the proposed increase on the Value Added Tax (VAT) and the Nation Building Tax (NBT) until the final hearing and the determination of the fundamental petitions challenging it or the necessary legislation is passed in Parliament.

The Bench comprising Chief Justice K. Sripavan, Justices B.P. Aluvihara and Prasanna Jayawardane observed that the notice issued by Inland Revenue Commissioner General Kalyani Dahanayake stating that as informed by the Finance Minister, the VAT rate of 15% and NBT rate of 2% will be implemented effective from May 2 is ultra vires. The Court was of the view that good governance cannot be allowed to violate the rule of law. MP Wimal Weerawansa, Ven. Maduruoya Dharmisiri Thera, Ven. Bengamuge Nalaka Thera, the Centre For Policy Alternatives and Sivapathasunderam Sivakumar filed petitions against the proposed imposition of the taxes. Manohara de Silva PC, Shavindra Fernando PC and Viran Corea appeared for the different petitioners.

The Court observed that the decision to implement the VAT increase violated Article 148 of the Constitution on the Control of Parliament over Public finance (which reads: Parliament shall have full control over public finance, no tax, rate or any other levy shall be imposed by any local authority or any other public authority, except by or under the authority of a law passed by Parliament or of any existing law) and the certain principle of interpretation of Article 148 shall be understood properly by ordinary people. The hearing was fixed for December 6. The SC on June 22 granted leave to proceed with the rights petitions challenging the imposition of the increased Value Added Tax (VAT) and Nation Building Tax (NBT). Senior Deputy Solicitor General Farzana Jameel with Senior State Counsel Shahida Barrie and Dr. Avanti Perera opposed the granting of interim relief. Mr. Weerawansa filed his application on the basis of public interest. He cited Finance Minister Ravi Karunanayake,

Treasury Secretary R.H.S. Samarathunga, Inland Revenue Commissioner General Kalyani Dahanayake and the Attorney General as respondents. Mr. Weerawansa said the Commissioner General of Inland Revenue was not vested with any authority or power to implement proposals on the instructions of the Finance Ministry, which had no authority of law.

He said there were no amending laws pertaining to VAT or NBT that have the effect of the above changes pertaining to the imposition of such taxes and that the notice and administrative decisions to collect such taxes on changed tax rates amounted to the abrogation of fiscal powers of Parliament.

Mr. Weerawansa said there was no law in force authorizing the Minister/Ministry or any other officer of the Finance Ministry or the Commissioner General of Inland Revenue to arbitrarily and capriciously impose such additional taxes and liabilities on the people. He is seeking a declaration that the notices published by the Commissioner General of Inland Revenue are null and void and no force or effect in law and that the notice bearing the title “Amendments to VAT and NBT and Share Transaction Levy (SLT) published by the Finance Minster and Secretary to the Treasury is null and void and no force or effect in law. Mr. Weerawansa sought interim relief suspending the operation and/or implementation of these notices.

No adverse impact on revenue collection: PM

In the wake of the Supreme Court’s interim order suspending the implementation of the increase on VAT and NBT, Prime Minister Ranil Wickremesinghe said the order was not expected to have any adverse impact on the Government’s revenue collection.

On July 11, 2016, the Supreme Court issued an interim order preventing the implementation of the recent revisions made to the Value Added Tax (VAT) and the Nation Building Tax (NBT) until the relevant legislation was passed in Parliament.

He said the VAT (Amendment) Bill had already been presented to the Parliament for the first reading on July 8 while the second reading was expected to be on July 23. “The National Unity Government, which has a clear majority in Parliament, expects the legislative process to be completed before the end of this month. Thereafter, the revised rates will be applicable with effect from May 2, 2016,” the Prime Minister said.