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The VAT (Value Added Tax) which replaces the Goods and Services Tax (GST) 12.5% and National Security Levy (NSL) 6.5% came into effect yesterday. According to a Department of Fiscal Policy report(pdf), consumer items such as essential goods and services including power, gas, essential foodstuffs, fertilizer, pharmaceuticals, medical and industrial equipment, agricultural and fishing equipment are liable to VAT. A 10% tax will be charged on all items given above and a 20% tax from the items excluded. “VAT is something we have been anticipating for many years because it is a more efficient way of taxing,” BOI Chairman, Arjun Mahendran said. “The previous way was a ‘turnover tax’ where the producers get taxed twice for their products. They were getting taxed both for raw material and at the selling of his product but with VAT he is free of raw material taxing,” Mahendran said. “But for the consumer it might not be a big relief as he is the last in the marketing chain,” he added. Inspite of strong resistance from the Opposition including the People’s Alliance and the JVP the VAT Bill was passed without any debate or vote when Parliament met on July 24.
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