VAT registration threshold to be slashed to Rs.60mn per annum

Sri Lanka will reduce the Value-Added Tax (VAT) registration threshold from Rs.80 million per annum to Rs.60 million per annum with effect from January 01, 2024.

The Cabinet of Ministers, on October 30, had given the nod to amend the VAT Act No.14 of 2002, imposing provisions to slash the limit of registration for VAT to the total value of supplies that tax can be charged from to Rs.60 million from the total value of supplies that can be recovered per year.

Further, Cabinet approval was also given to raise the VAT rate from 15% to 18%.

The Bill was subsequently drafted by the Legal Draftsman adding applicable revisions and the clearance of the Attorney General, too, was received for the document.

Later, the Cabinet of Ministers green-lighted the resolution submitted by President Ranil Wickremesinghe, in his capacity as the Finance Minister, to publish the draft bill in the government gazette and subsequently furnish the same to the parliament for its concurrence.

As such, the Third Reading of the VAT (Amendment) Bill was passed with amendments in parliament on Monday, by a majority of 45 votes, with 100 MPs voting for the Bill, and 55 voting against it.

Accordingly, the House had approved a hike in VAT up to 18% from the current 15%, ahead of the International Monetary Fund’s preparations to approve the second tranche of a $2.9 billion bailout for the crisis-hit country. The Executive Board of the IMF is set to take up for consideration the first review of the 48-month Extended Fund Facility (EFF) Arrangement for Sri Lanka today.

Meanwhile, the Ceylon Chamber of Commerce has raised concerns about the proposed increase of the VAT to 18%, emphasizing that the move could lead to a further decline in consumption.