IRD lights up new simplified VAT scheme

By Uditha Jayasinghe

The Inland Revenue Department (IRD) is encouraging exporters to shift to the Simplified VAT (SVAT) system implemented by the Budget in a bid to reduce the amount of claims processed by them.

Currently the IRD processes around Rs. 10 billion worth of claims each year and they hope to reduce this to Rs. 2 billion to Rs. 3 billion with the implementation of the SVAT. Already over 2,800 exporters have registered and the IRD is keen on motivating traders to do the same. In the first quarter of 2011, the IRD paid Rs. 2 billion in VAT repayments. This was slightly higher than the previous year, noted IRD Deputy Commissioner General Mallika Samarasekera, though declining to give the amounts.

Around 5,000 VAT claims are backlogged at the moment from the 18,000 odd backlogged vouchers that were funnelled to a special clearing programme in November 2009. In addition there are around 7,000 claims that were not cleared in 2010.



According to Samarasekera, even though the VAT repayment amounts have remained largely static with Rs. 7.8 billion in 2009 and Rs. 8.7 billion in 2010, the number of claims that need to be processed has increased from 8,433 in 2009 to 11,319 in 2010.

“There are many procedures that need to be followed when making these payments. The biggest reason for most of the claims to be delayed is because most companies don’t know how to do the necessary paperwork. Lack of proper accounting is also an issue. Of the remaining 5,000 claims, we have begun auditing several companies to ensure that the payments are made to the right companies,” she said.

In November 2009, the IRD outlined plans to clear a backlog of 18,000 VAT claims, some of which have been stagnating for as many as four years. However, the scheme soon ran into red tape with the elaborate checking process that was implemented by the IRD after the famous VAT scam several years ago. Fourteen months later, the IRD has made 6,000 cancellations and cleared a total of 12,000 claims in total by 1 December 2010, leaving 5,000 more to be processed in 2011.