A team from the Guyana Manufacturing and Service Association (GMSA) led by its President Shyam Nokta and including Board Member Ramesh Dookhoo and Chair of the Forestry and Wood Processing Sub-Sector Rafeek Khan met with Commissioner General Godfrey Statia and his GRA team yesterday to discuss several key issues affecting the manufacturing sector.
The meeting was called as a follow up to the GMSA registering concerns to Minister of Finance Winston Jordan in June 2018 regarding the impact of the Amendment to the VAT Act in January 2018 on some sections of the manufacturing sector.
The results of the amendments being that certain businesses involved in exports were unable to reclaim the Value-Added Tax paid on inputs on the goods exported. The GMSA contended that the amendment, contrary to what the Minister had intended and as stated in his budget speech, affected major sectors of the economy, foremost being the forestry and wood processing sector.
The GMSA further contended that the VAT on such inputs serves as a dis-incentive to producers who primarily manufacture for export and comes at a time when the forestry and wood processing sector are facing several challenges including the deplorable state of interior roads and when there is a strong push for more value adding to target external markets.
The Commissioner General indicated that in keeping with the Minister’s pledge of no new taxes and the fact that the Amendment was intended to improve administrative efficiency of the VAT administration, that GRA is exploring ways to address the issue.
He also requested that the GMSA explore other avenues and make suggestions with financial analyses rather than making broad statements since the GRA’s analysis using return submissions have revealed a negligent impact on the industry. Despite the Commissioner General’s position, the GMSA stands by its position regarding the adverse impact on key economic sectors. The GMSA also raised other issues pertaining to tax administration including the implementation of the new scanner system and processing times, and put forward for consideration a request for incentives for manufacturers in relation to energy and renewable energy technologies.
A list of procedural issues relative to facilitating the smooth flow of businesses was also given to the Commissioner for his attention in the near future.
Also raised was the issue of addressing Excise Duty on Indigenous Wines in keeping with the Government stated policy of incentivizing local manufacturing. The issue of Excise taxes on Shandy was also discussed whereby the current structure is not in line with other Caribbean territories and has therefore disadvantaged Guyana’s producers. The issue of whether or not VAT could be reclaimed on export items had been a recurring issue since the Amendment of the VAT Act.
The issue stemmed from items at the beginning of the product chain being subject to VAT, while the end product was not. This thereby upped the cost of production but did not allow for an increase on the selling price as the VAT on the item at the beginning of the product chain was not subject to being reclaimed.
An example of this would be if pepper attracted VAT, but pepper sauce did not. The manufacturer would find they would be paying more for the raw product (pepper) while unable to increase the cost of the final product (pepper sauce).
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