VAT vortex

Tuesday, 9 November 2010 05:07 - - {{hitsCtrl.values.hits}}

* Programme to clear 18,000 VAT backlog makes 6,000 cancellations and has 7,950 claims to process

* Deadline extended for year end

* Regular payments clear

Rs. 5 billion for first half of 2010

Going by the adage better late than never, a special programme that was started a year ago to clear 18,000 VAT backlogs in the Inland Revenue Department (IRD) is still stagnating with 6,000 cancellations, but has given a 31 December deadline to finalise document presentation for exporters.

By Uditha Jayasinghe

However, the establishment tagged up a Rs. 5 billion repayment for the first half of 2010 for regular payments.

In November 2009 the IRD introduced a programme aimed at clearing the backlog – with some claims that were as much as four years old by January 2010. However, a year later part of the backlog remains with 6,000 cancellations and 7,950 claims still to be processed.

IRD Deputy Commissioner General (Indirect Tax) Mallika Samarasekera told Daily FT that during the first six months of the year, the department had processed claims made by 1,200 exporters and issued 6,750 cheques totalling Rs. 5 billion.

The IRD commenced clearing backlogs of VAT about a year ago and Samarasekera insisted that the delay was mostly due to the complicated checking process that the institution had adopted following the much publicised multi-million VAT fraud several years ago.

“As of 30 September we have completed Rs. 5 billion worth of repayments and at the end of June the amount was Rs. 3.5 billion. Even though there are about 3,000 exporters, we only have about 1,200 of them filing claims,” she said, adding that the backlogged VAT payments were being gradually cleared.

Three stumbling blocks exist for the backlogged payments with exporters whose numbers do not tally with Customs records having to re-file their claims. Currently there are over 2,700 such applications totalling Rs. 1.2 billion with the IRD and they have to be processed before 31 December.

“I have given them till the end of the year to present us with accurate figures because otherwise we cannot pay them. There are oversights that must be addressed by the companies and we are extra careful after the VAT fraud.”

Samarasekera explained that the company numbers had to be crosschecked with the Textile Quarter Board statistics as well and that 1,450 applications totalling Rs. 560 million were delayed as a result. Over 3,800 that fall into the “no response” category are still languishing as the IRD tries to contact the companies that filed the claims – some years ago.

“Two months ago we issued a paper notice asking people with VAT repayment problems to contact us but only 50 to 60 responded,” she remarked, pointing out that with the deadlines for cancellation being extended, it was difficult to predict when the backlog would be cleared.