Sri Lanka's construction industry along with the millions of people who are building or repairing their houses have been pushed into dire straits due to skyrocketing prices of tile and sanitary ware products following the government’s recent decision on tax revision.
Importers and retail dealers of ceramic ware complained that the government-imposed duty and new CESS on the import of ceramics and tile will cause local prices to rise in unbearable promotions.
Traders said prices have shot up because of the shortage. A 2×2-foot tile that was selling at Rs. 650 now costs Rs. 1,750.
While an imported commode was selling at Rs. 22,000 and with no stocks available in the market currently, a similar commode supposed to be produced locally is now selling at Rs. 43,000, they noted. The prices of tile and ceramic ware sky rocketed by 100 -150 per cent at present from earlier prices and there is a severe shortage of products in the local market.
The country will be losing Rs. 15 billion as taxes per annum, several local importers said, adding that with the present depreciation of the rupee, they are faced with bigger issues as they buy in dollars and sell in Sri Lanka rupees.
At present, this industry provides direct and indirect employment to around 50,000 individuals island-wide with over 2,000 dealers countrywide.
All of them are being severely affected as the import sector has already collapsed inflicting a spillover effect on auxiliary related industries such as warehousing and logistics, clearing and forwarding, banking and finance, construction and commercial real estates.
However, action has now been taken to remove restrictions allowing the importation of these ceramic ware including tiles subject to special CESS with amicable agreement of importers and local manufacturers, finance ministry sources said.
This agreement was reached at a meeting this week chaired by Treasury Secretary S.R. Attygalle with representatives of Tile and Sanitaryware Importers Association along with the local manufactures to discuss a way forward to both facilitate a healthy level of imports while protecting local manufacturers, a senior official of the ministry said.
The meeting was successfully concluded with all parties agreeing to revise import duty and impose a new CESS of Rs. 490 per square meter of tiles instead of the currently applicable CESS based on the value of tiles.
Sanitary ware importers have agreed to revise customs duty to 30 percent from 15 percent at present the CESS to a flat rate of Rs. 125 per kilo.
At present, there was no CESS on certain sanitary ware products and others are charged at 15 percent or Rs. 40 per kilo, a senior official said.
Although there was consensus on these new rates, the government has to take a decision on this matter at the highest level before the approval of the Finance Minister, he added.
The need to protect the local manufacturers has been brought to the attention of high authorities as it has already made very high investment for production expansion.
Three local large-scale tile manufacturers and seven bath ware manufacturers dominate Sri Lanka’s tiles and bath ware manufacturing industry - a vital sector in the construction sector, industry sources said.
These manufacturers possessed a current combined annual production capacity of 17 million square meters of tiles and approximately 700,000 bath ware pieces.
They are planning to increase tile production capacities by another 3.5 million square meters this year and will result in a total local production output to 20.5 million square meters by mid 2021.
These large-scale local manufacturers have invested over Rs.35 billion up to now and thy are paying over Rs.5.5billion in taxes per year providing employment to over 7,500 Sri Lankans these sources revealed.