The government has backtracked on its move to implement the new VAT law from the start of the new fiscal year in the face of resistance from businesses, a section of revenue officials and inadequate preparation by the National Board of Revenue (NBR).

It became apparent from the finance minister's disclosure during his budget speech when he said that the VAT and Supplementary Duty Act 2012, which envisages a universal 15 percent VAT rate, have been rescheduled to be effective from July, 1 2017.

Instead of going ahead with the new law, AMA Muhith seeks to increase VAT for various goods and services including small businesses, particularly shop owners who have been demanding of continuation of package or fixed VAT.

"Unfortunately, the necessary preparation for achieving the above objective is far from satisfactory. Under the above circumstances, government has decided not to fully implement the new act from the next financial year," Muhith said, in his budget speech at the parliament today.

 "Our objective to implement the new act has not changed, we will only implement the new Act after one year," he told the parliament.

This would be second year the government backtracked on its stance to enforce the law that will replace the VAT law of 1991.

Initially, the government vowed to implement the legislation, framed at the prescription of the International Monetary Fund, from July 2015.

However, it failed to proceed with the plan due to lack of preparation of the revenue authorities and resistance from within the NBR and the business community.

Businesses demand implementation of recommendations of a panel, formed by the government in 2014 by including their representative. The committee suggested multiple rates for VAT on goods and services.