Abstract:
1. Introduction
The government has increased the VAT rate from 15% to 18% from the 1st
of January 2024. Hence, VAT-registered companies have increased their
prices under the VAT increase. Some non-VAT-registered goods have also
seen price hikes, sometimes exceeding the VAT percentage. This is a
serious issue in Sri Lanka as many non-VAT-registered goods are sold at
higher prices. This study aims to investigate the effect of value-added tax
on the pricing behavior of non-VAT-registered goods, as evidenced by the
vegetable market in Sri Lanka.
2. Research Methodology
The mixed-methods approach and convergent parallel design were utilized
in this research. The quantitative phase focused on the Dambulla district
retail vegetable market as a sample, and the sample period was three
months before and after VAT. Further, secondary data collection was used.
The qualitative phase focused on the Dambulla district retail vegetable
farmers as the respondents and the purposive sampling technique was
used in this study. Descriptive analysis and thematic analysis were utilized
as the analysis techniques.
3. Findings and Discussion
The present study found that there is an effect of VAT on the pricing
behavior of the vegetable market. Results showed that carrot, cabbage,
tomato, and pumpkin prices significantly increased. Thematic analysis of
interviews with vegetable farmers discussed how the increase in VAT
affected their day-to-day operations and pricing policies. Farmers said that
the cost of living and operational costs were part of the reasons for
inflation in vegetable prices.
4. Conclusion and Implications
The present study examines the effect of VAT on the pricing behavior of
non-VAT registered goods, focusing on the vegetable market. The
quantitative data points to clear statistical changes in vegetable prices, and
the qualitative insights provide context to the lived experiences of farmers.
This study provides rich insight for policymakers in the agricultural sector.
