Maldives begins implementation of Goods and Services Tax law

The Maldives has begun implementation of Goods and Services Tax (GST) today, amid many voices of criticism from various quarters about the timing of the tax system, as well as many complains claiming that the GST Act is in contravention to a number of prevailing laws on customs duties.

Some have claimed that many GST would be levied in accordance with the Act on many items which are subject to customs duties as well under other laws and regulations. Such goods include vegetables, fruits, coffee, tea, grains, game meat, sugar, all of which are already levied a 15 per cent customs duty, and also diesel, cooking gas and petrol, which are subject to 10 per cent customs duties.

Another concern of many critics is that GST would be levied twice on some goods, once upon sale to retailers by wholesalers, and again upon sale to consumers by retailers. Fathuhullah Jameel, Director of Taxation at the Maldives Inland Revenue Authority, said that such an error would not be possible, explaining that GST would be charged on the last link at the chain of distribution.

However, when asked about the possible scenarios of GST being levied on the retailer as well as the consumer, he admitted that it is possible under the current regulations, although he said that it would happen depending on how the traders price goods.

GST would not be levied on some 17 items as per the current regulations. They include rice, sugar, flour, milk, cooking oil, egg, tea, fish, potato, onions, spices, Maldive palm products, carrot, cabbage, beans, tomato, fruits, bread, diaper for infants as well as adults, baby food, cooking gas, diesel, and petrol. Of these, all are eligible for customs duties except flour and rice.

The Maldives Chamber of Commerce and Industries (MCCI) has warned that GST would push inflation higher and higher in the days to come. MCCI has also filed a lawsuit at the High Court of the Maldives, seeking interim order to delay the implementation of GST Act. The case was filed last Thursday, and while the Act has come into effect at 12 noon today, there has been no development as yet in the lawsuit.