Anomalies in tourism industry relief measures introduced by government

COLOMBO (News 1st): The government recently introduced a wide range of measures to help revive the tourism industry that was hit hard by the devastating 04/21 attacks. However, several anomalies have been detected by experts in the tourism industry. Among the relief measures introduced by the government, was the much-lauded reduction of value-added tax from 15% to 5%. As per the extraordinary Gazette notification dated May 21st, 2019, published under section 2A of the VAT Act, VAT rates were reduced from 15% to 5%, one year commencing from May 21st 2019, on hotels and tour operators registered with the Sri Lanka Tourism Development Authority. However, the tourism industry is now faced with a fresh dilemma, as the current VAT act restricts the claim of input credit if the output VAT is at 5%. According to the third provision to section 22, subsection 3 of the VAT act, any person who accounts for the output tax at the rate of 5%, shall not be entitled to deduct any input tax. The relief package announced by the government also includes a one-year moratorium that will be provided by the Central Bank, to institutions as well as employees in the tourism industry, on a case by case basis. Experts say that while a moratorium will reduce the burden of the industry, by deferring capital and interest payments on debt, the government could have opted for a more straightforward approach, rather than paving the way for, favouritism and political patronage.