Sri Lanka to increase VAT from September
August 30, 2022 01:23 pm
The Value-Added Tax (VAT) will be increased from 12% to 15% effective from September 01, President Ranil Wickremesinghe told the parliament today.
The Head of State, in his capacity as the Minister of Finance, Economic Stabilization, and National Policies, presented the Appropriation (Amendment) Bill, for the remainder of the fiscal year 2022, to the parliament this afternoon.
Goods imported to Sri Lanka, and goods and services supplied within the country’s territorial limits are subject to the VAT.
After the previous government introduced a relaxed tax policy in late 2019 to reduce the rates of VAT, personal income tax, corporate income tax and to shrink the tax base on VAT and income tax, its revenue dropped by nearly Rs. 600 billion-Rs. 800 billion.
Taking this into account, in May this year, Wickremesinghe, who was serving as then-Prime Minister, proposed to instruct the legal draftsmen to prepare the necessary Bills to amend the Value Added Tax Act, Telecommunication Levy and Betting and Gaming Levy.
The former government led by ex-President Gotabaya Rajapaksa had reduced the VAT from 15% to 8% effective from December 01, 2019, and increased the limit for registration for VAT from Rs. 3 million per quarter/Rs. 12 million per year to Rs. 75 million per quarter/Rs. 300 million per year.
With the adverse effects of the Covid-19 pandemic and the aforementioned amendments, the VAT revenue decreased from Rs. 443.9 billion in 2019 to Rs. 233.8 in 2020, by 47%.
Accordingly, the Value-Added Tax was increased from 8% to 12% earlier this year.
President Wickremesinghe said further that most of the revenue proposals introduced in May 2022 are expected to be effective from October 01, 2022.
“The implementation of these proposals will help increase the revenue. It will enable the gradual reduction of the quantum of monetary financing for government expenditure.”
Meanwhile, the government also expects to present new revenue-enhancing proposals aiming at Budget 2023, he added.
