Colombo Tea auction moves ahead in 2024

The Colombo Tea auction was further delayed by another one hour on Thursday when it was planned to be held for the first time in the New Year as producers were in a rush to obtain SVAT registration.

On Thursday as a result of stocks holding on since before Christmas there was pent up demand at the Colombo auction this week, Asia Siyaka Commodities Managing Director Anil Cooke told the Business Times.

But the day started out with a bit of chaos at the auction as tea producers were still running around trying to obtain the SVAT registration and some even obtaining a temporary registration in a effort to carry out their sales at the auction.

The industry was working with the Finance Ministry and the Inland Revenue Department (IRD) to ensure there could be a speedy resolution of the entire process. However, even by Thursday only about 40 per cent of the producers have been registered for SVAT by the IRD, Mr. Cooke said.

With the VAT of 18 per cent on producers coming into effect from January 1, 2024 tea producers have been trying to obtain a suspension on the VAT due to the fact that the VAT component is not imposed on exports. As a result, producers have been compelled to obtain the SVAT certification in order to exempt them from being charged VAT at point of sale.

Mr. Cooke explained that they are trying to obtain a digital certification as well and noted that the bureaucracies involved in the granting of the SVAT certification has caused delays in the process and it is likely to cause more paperwork in future for tea factories as well.

Meanwhile since the postponement of the auction last week the authorities insisted this week's auction not be postponed further as it will delay the payment of small farmers.

Due to the problems surrounding the issue of VAT some buyers went ahead and purchased from those not registered yet but were ready to obtain the certification. As assurances were given to buyers that the producers will obtain the certification the prices also did not come down.

It has been a confusing two weeks for the tea industry with the auction postponed last week and opening an hour late this week.