The Chairman of the Committee on Public Finance (CoPF) Parliamentarian Dr. Harsha de Silva has welcomed the decision by the government to withdraw its proposal to lower the Value Added Tax (VAT) registration threshold, allowing businesses with annual turnover below Rs. 60 million to remain outside the VAT net.

The decision follows weeks of criticism from business groups, tax professionals and opposition lawmakers, who argued that the move would have placed an additional burden on small and medium-sized enterprises at a time when many were still recovering from recent economic challenges, the CoPF Chairman said.

MP de Silva, while welcoming the move of the government, stated that efforts to expand the tax base should be carried out in a fair and equitable manner.

The Parliamentarian alluded that the proposed reduction in the threshold would have exposed smaller traders to significant penalties for non-compliance, while larger tax administration and enforcement issues remained unresolved. He also questioned the treatment of sectors such as online gambling and raised concerns over alleged shortcomings in VAT collection and remittance by certain institutions.

The tax base must be expanded, but it cannot be done by disproportionately targeting small businesses while other areas of tax leakage remain unaddressed, he said.

According to MP de Silva, the matter was raised repeatedly before the Committee on Public Finance and in Parliament. He noted that the overwhelming majority of public submissions received during the consultation process opposed the proposed reduction of the threshold.

Meanwhile, the government had maintained that lowering the VAT threshold would broaden the tax base and strengthen revenue collection. However, critics argued that the measure would have increased compliance costs for smaller businesses and added pressure on enterprises operating on narrow profit margins.

With the latest decision, the VAT registration threshold will remain at Rs. 60 million in annual turnover, preserving the existing exemption level for thousands of smaller businesses across the country.