TAX REFORMS RELEASED VAT 12% (31-05-2022)

 

The Gota-Ranil government has proposed certain tax reforms to be implemented over the immediate and near term to increase government revenue. 

The Value Added Tax has been increased from 8% to 12%. In addition, the Telecommunication Levy was increased from 11.25% to 15% with immediate effect.

Sri Lanka introduced a low tax regime in late December 2019 which resulted in the revenue to GDP ratio declining to 9.1 percent in 2020 from 12.7 percent in 2019 and further deteriorating to 8.7 percent in 2021.

Issuing a statement, the Office Prime minister said the implementation of a strong fiscal consolidation plan is imperative through revenue enhancement as well as expenditure rationalization measures in 2022 and beyond to ensure macroeconomic stability to support the medium to long-term economic growth objectives of the country.

Proposed tax reforms are as follows.

· VAT to be increased from 8% to 12%

· Telecom Levy to be increased from 11.25% to 15%

· Reduction of Personal Income Tax relief from Rs. 3 Million to Rs. 1.8 Million

· Impose Withholding Tax (WHT) on service payments exceeding Rs. 100,000

· Corporate Income tax to be increased from 24% to 30%

· VAT registration threshold reduced from Rs. 300 Million to Rs. 120 Million

 In addition, Finance Ministry has given directions to increase the Import Levy, VAT to 12% & Surcharge on Customs Duty for a number of imported items.

    · Tyres for cars, motorcycles & trishaws

    · ACs, washing machines, rice cookers, microwaves, fridges

    · Mobile phones

    · Other electrical appliances

    · Chocolates

    ·  imported yogurt, butter, and spreads

    ·   Apple, grapes, and dates