The Deputy Minister of Economic Development, Nishantha Jayaweera has clarified reports surrounding the gazette notification issued to revise Value Added Tax (VAT) with effect from July 1.
Issuing a statement, Deputy Minister Jayaweera said the move is aimed at simplifying the tax system in line with government policy, by merging VAT and the Social Security Contribution Levy (SSCL) into a single tax.
He explained that banks and financial institutions, which were previously subject to 18% VAT and a 2.5% Social Security Contribution Levy, will instead pay a consolidated 20.5% VAT from July 1. However, he stressed that the Social Security tax will no longer be charged separately.
Deputy Minister Jayaweera noted that claims circulating, particularly on social media, that VAT is being increased to 20.5% are misleading, as the change reflects a restructuring rather than a new tax hike.
He added that the revision would also reduce administrative requirements, as financial institutions will no longer need to submit separate filings for the two taxes.
