The Hon. (Dr.) Anil Jayantha - Minister of Labour and Deputy Minister of Economic Development

¶ 01 Hon. Deputy Speaker, today we present for approval the Gazette Extraordinary No. 2437/04 issued under the Imports and Exports (Control) Act, relating to the import of salt. Under section 20 of Act No. 1 of 1969, there arose a legal necessity regarding salt imports. By Regulation under Gazette No. 2312/77 dated 01.01.2023, salt imports were subject to import licensing controls; in other words, imports were restricted and the space to import was very limited. However, within a short period after we assumed regulatory authority, a shortage of salt emerged domestically. This shortage was mainly due to climatic factors affecting salt production—continuous rainfall and insufficient sunlight—because salt in Sri Lanka is produced entirely through natural evaporation and is therefore weather-dependent. Salt is a good with inelastic demand; it is continuously needed. Therefore, allowing a shortage in the market under any circumstances is not acceptable for a government. We therefore decided to allow salt imports, though it relates to a domestic product.

¶ 02 With Cabinet approval, the Gazette No. 2437/04 dated 2025.05.19 was issued and is now placed before Parliament for legal approval. By this Gazette, we propose to lift the import restrictions and allow imports of both household and industrial salt, whether iodized or not, without an import licence. However, limits apply: imports must relate to consignments shipped before 10 June 2025.

¶ 03 Those processes are underway and that date has now passed. Imports have been completed and a considerable quantity has reached the market; the salt queues in the market have ended.

¶ 04 Let me note: when individuals or groups try to maximize private profit, small market gaps are used to extract excessive gains. When a shortage emerged and we issued this Gazette to allow imports, the price per kilogram of salt rose sharply despite significant state intervention in domestic production. That was not a good situation. Now, through this regulatory relaxation, adequate quantities can be obtained, prices have been contained, and stocks are available. There will be no shortage. Also, measures are being prepared to accelerate domestic production. We are inviting private producers to increase output. As an island, we can use our saline waters to expand production with quality suitable even for export markets. In today’s market, distortions can arise across production, trade and pricing.

¶ 05 Regarding trade, one can sell domestically or produce after importing inputs. We will guide and encourage the business sector towards production. Regrettably, although imports had to be shipped before 10 June, various actions by importers resulted in numerous regulatory breaches being reported; I will table those details. As at now, the shipment deadline has passed. For consignments shipped before the date, proper clearance can proceed by submitting details to Customs. However, according to the Department of Customs, about 29,900 metric tonnes of salt remain not yet entered to CusDec.

¶ 06 Salt is imported either for processing or for direct consumption, but ultimately it is consumed by people. Industry uses salt in curd, biscuits and other products; therefore import quality assurance and food safety are crucial. The Sri Lanka Standards Institution is currently holding about 300 containers of salt under testing; some may not meet standards and some consignments have been sent back. Another 37 containers are to be tested at RCT. Where these regulations under Gazette No. 2437/04 have been breached, the stipulated measure is re-export of the salt stock.

¶ 07 We also intend to promote domestic salt production. Sri Lanka has strong potential—not only for self-sufficiency but to produce higher quality salt by introducing technology and mechanization. The government will take maximum measures and provide facilities. We urge the private sector to release higher-quality, competitively priced salt to the domestic market and value-added products for export.

¶ 08 Let me also address attempts to create instability in the country at a time we are stabilizing. Creating disbelief that investors will not come is not helpful. Investors are gradually coming; that is why FDI is rising and investor-confidence indices are improving, as are diplomatic relations. The Purchasing Managers’ Index has increased; these are data. While production has not surged massively overnight, confidence among investors and those engaged in production is improving steadily. That is why in the first quarter we recorded 4.8 percent economic growth, with industry growing by 9.7 percent.

¶ 09 Regarding the recent US tariff policy: initially we were proposed a 44 percent rate, later a 10 percent common rate was announced to take effect on the 9th of this month (tomorrow). Country-specific outcomes will be presented, and countries with strong bilateral outcomes may receive special rates. A list of 14 countries with large US trade gaps has been issued—many in Asia (Japan, South Korea, Thailand, Malaysia, Indonesia, Bangladesh, Laos, Myanmar, etc.). Minimum rates around 25 percent and higher rates up to 40 percent for some have been announced until 1 August, after which bilateral arrangements may apply. We are in discussions; details will be presented after agreements are finalized. These could be beneficial for our manufacturers, economy and working people.

¶ 10 On VAT and digital services: the Leader of the Opposition raised under Standing Order 27(2) that an additional VAT is being imposed on digital services. That is incorrect. We have not introduced a new separate tax; this is under the VAT Act. To ensure a level playing field, digital services consumed in Sri Lanka—whether supplied domestically (e.g., PickMe) or from abroad (e.g., Uber)—are to be subject to 18 percent VAT. This was announced in the Budget and was to take effect on 1 April, but due to litigation it could not. After discussions and court matters concluded, agreement is for effect from 10 October. Thus, there is no new 18 percent tax beyond that; and service exports remain zero-rated for VAT, with income taxed on profits with reliefs. The top personal tax rate is 36 percent, but for relevant service exporters VAT does not apply; for profits, concessions exist.

¶ 11 On e-commerce and de minimis: many countries allow low-value parcels to enter duty/VAT-free up to a threshold. In Sri Lanka, de minimis implementation has had issues—misuse via splitting consignments and B2B volumes pushed through courier B2C channels. Customs are addressing this. No new tax has been imposed; rather, existing rules are being implemented. Some temporary congestion occurred but Customs report it has been cleared.

¶ 12 Finally, our government is intervening through proper regulations and legislation to take the country out of crisis in an orderly, principled manner.

¶ 13 Thank you.

¶ 14 Question proposed.