Imported canned fish temporarily suspended after local manufacturers complain of VAT woes
The Fisheries Ministry has this week decided to temporarily halt importing canned fish until further notice after local manufacturers complained of challenges they are facing in the wake of a zero to eighteen percent hike in the Value Added Tax (VAT) that came into effect this month.
The directive came on Thursday after representatives of the Canned Fish Manufacturers Association met with Fisheries Minister Douglas Devananda and briefed him.
"We have had a discussion with the local manufacturers on this. They explained to me how difficult it has become to run their industries in the long run. At the same time, we cannot completely stop the canned fish imports as well. We have to find a winwin situation for both parties, and we hope to do so in the coming weeks, followed by further discussions," Minister Devananda told the Sunday Times.
During the meeting, the local manufacturers pointed out that there was a sharp price disparity between the locally manufactured canned fish tins and imported ones as a result of VAT and Cess, which were affecting their sales. With the recent tax hike coming into effect, the price of locally manufactured canned fish tin will increase by Rs 125, making it difficult to compete with imported brands, they say.
"Being an island nation, the government’s priority is to support the local canned fish manufacturing industry while ensuring that consumers are not affected by price disparities or in terms of affordability as well," Minister Devananda said.
The Minister instructed senior officials of the Ministry and Fisheries Department on Thursday to submit a report on the possibility of introducing a new levy for the huge amount of imported fishstocks that were brought into the country in recent months ahead of the tax hike coming into effect. Since the directive came into effect with immediate effect, he was instructed to allow the import orders that were placed before Thursday.
The day after the meeting with local manufacturers, a group of officials representing the Lanka Canned Fish Importers
Association also met with the Minister and explained the challenges they face in the market as well.
Currently, imported canned fish stocks are subjected to a Special Commodity Levy (SCL) of Rs 200 per kilogram. The price of imported canned fish ranges from Rs 425 (Chinese brand) to Rs 975 (Chilean brand), depending on the manufacturing country.
The current price of locally manufactured canned fish ranges from Rs 690 onwards, and the prices are expected to be revised with an increase of Rs 100–125 in keeping with the VAT. Local canned fish manufacturers are also required to pay Rs 6 as SCL tax per kilo when importing raw fish from abroad.
Canned Fish Manufacturers Association president Shiran Fernando told the Sunday Times that the local industry that provides jobs to about 2000 people is facing “existential” challenges due to unfair market challenges.
“The Government must step in to ensure the continuity of the industry since we are subjected to VAT tax from zero to 18 percent now, while imported canned fish are
only subjected to SCL of Rs 200 for drain weight only, not net weight. The government should increase the tax to ensure a level playing field for us too,” he said.
Stressing that even in the case of importing raw fish, Mr. Fernando said that the local manufacturers add seventy percent of value to the products but are still unable to compete in the market.
He also rejected claims that the local canned fish manufacturing industry received subsidies from the government, an allegation levelled by importers.
Chathuranga Wickramanayake, attached to the Lanka Canned Fish Importers Association, is of the view that the local manufacturing industry is not sustainable in the long run since it has to depend on imports for other raw materials for production.
“What matters finally is the quality of the product, as we have seen in the local market where consumers prefer good-quality canned fish products compared to poor quality, which is often the case with most locally manufactured ones, unfortunately,” Mr. Wickramanayake said.