The Finance Ministry announced today that the amendments to the Value Added Tax and the Nation Building Tax will be effective from November 1st.
Accordingly, the current 11% VAT will be increased up to 15%.
VAT has been imposed on several goods including cigarettes, liquor, telephone services, electrical equipment, jewellery and powdered milk.
However, it is significant that 82 essential commodities have been exempted from VAT.
At the same time, the VAT amendment passed in parliament yesterday has reduced the turnover limit of retail and wholesale VAT registration in one quarter to 12.5 million rupees from previous 100 million rupees.
At the same time, the average taxable turnover limit for a quarter year has also been reduced to 3 million rupees from previous 3.7 million rupees.
Cigarettes, liquor, telephone services, electrical equipment, jewelry and powdered milk were exempted from VAT in the past.
However, prices of such goods likely to rise as VAT has been imposed on them under the new amendment.
Drugs, OPD services, surgical services and dialyses have been exempted from VAT but fees for consulting doctors and medical specialists as well as private hospital room have been categorized as taxable services.
Sale of housing and 31 food items including sugar, dhal, dried fish, vegetables, fruits, potatoes, red onion, big onion and chilies have been exempted from VAT.
In addition, diesel, petrol, kerosene, mobile phones, construction equipment, computer and computer accessories, fishing gear and several other goods have also been exempted from VAT.
Although the existing 2% Nation Building Tax remains unchanged, the taxable turnover limit for a quarter year has been reduced to 3 million rupees from the previous 3.75 million rupees.
Telephones, communication services and electricity have been included in the Nation Building Tax.
The Finance ministry stated that new VAT on electricity would not affect the electricity bill.
However, this would bring some impact on new businesses.
Full list is given below..
Products used to make spectacles
Vehicles with manufacturing VAT
Paddy harvesting machinery
Bakery product producing machinery
Milk producing machinery
Solar power generating equipment
Equipment used to manufacture energy-efficient lightbulbs