VAT on fuel already subjected to several taxes unfair – SJB trade union wing

How come royalty on foreign players replaced with additional Rs 50 charge on a litre of fuel?

by Shamindra Ferdinando

Convenor of the Samagi Joint Trade Union Alliance Ananda Palitha yesterday (12) said that the Wickremesinghe-Rajapaksa government was planning to impose VAT on fuel already subjected to several taxes amounting to Rs 75, an extremely high Rs 45 ‘administrative’ charge and Rs 50 per litre collected to settle USD3 bn loan that the CPC has taken from the People’s Bank and the Bank of Ceylon.

The former CPC employee found fault with the Opposition for failing to vigorously take up the issue during the debate on VAT.

Of the 225 MPs, 92 voted for the VAT (Amendment) Bill and the Finance Bill while 41 voted against at its Third Reading.

According to him, the absence of 92 members at the time of Monday’s vote against the backdrop of ending of session on the previous day for want of quorum exposed the deterioration of parliamentary standards.

Pointing out that fuel hadn’t been previously subjected to VAT, the trade unionist said that in terms of the newly enacted law 18 % VAT was to be imposed on already heavily taxed fuel.

Asked to explain, Ananda Palitha said that Rs. 75 tax imposed on a litre of fuel (both diesel and petrol) consisted of Port and Airport Development Levy, Customs duty, Excise duty and Social Security Tax. In addition, the government and other players added a Rs 45 ‘administrative’ charge for every litre of fuel, Palitha said, adding that this administrative charge though necessary could be limited to half of the amount now charged.

Petrol 92 Octane is priced at Rs 346 per litre, Petrol 95 Octane Euro 4 at Rs 426, auto diesel Rs 329 and super diesel Rs 434.

However, the biggest issue is the addition of Rs 50 as a special charge with effect from June 1, 2023 after doing away with previous decision to levy 1% tax on monthly sales of new entrants to the domestic fuel market, namely Chinese oil giant Sinopec, US-based R.M. Parks and United Petroleum of Australia.

This was to be utilized to settle USD 3 billion loans taken by the CPC but recently transferred to the Treasury to enable the state enterprise to compete with foreign players, Palitha said. But, following representations made by Sinopec, the government abolished 1% tax on their sales and added a new Rs 50 charge on all sales of diesel or petrol, Palitha said, urging the Opposition to examine the issue at hand without further delay.

According to Palitha, Rs 50 charge has been accommodated within Customs duty and consumers brazenly fleeced in a way that was never practiced here.

Palitha said that 18% VAT on fuel would trigger a severe crisis which the government was certainly not equipped to handle.

The former UNP trade unionist alleged that the relevant Sectoral Oversight Committee and parliamentary watchdogs hadn’t looked into this matter at all.

According to him, massive fraud was being perpetrated under the very noses of Parliament that is supposed to be responsible for public finance at all levels.