The Cabinet of Ministers has approved a draft bill to amend the Inland Revenue Act No. 24 of 2017 and the Value Added Tax (VAT) Act No. 14 of 2002 and to table it in Parliament after publishing in the government gazette in order to implement the tax proposals in the Budget 2021.
Prime Minister, Mahinda Rajapaksa in his capacity as the Minister of Finance sought Cabinet approval for the draft bill submitted by Legal Draftsman to amend the Inland Revenue Act, No.24 of 2017 and the Value Added Tax Act, No.14 of 2002, after securing clearance from the Attorney General.
Accordingly, Co-Cabinet Spokesperson and Minister of Media, Keheliya Rambukwella yesterday said 14 percent tax on Individuals and companies engaged in agricultural activities and 14 percent corporate income tax imposed on information and technology services firms would be removed. The 14 percent corporate income tax on gem and jewellery exports is also proposed to be abolished. Further, the 26 percent tax imposed on gem and jewellery sales within Sri Lanka is also to be slashed to 14 percent. The current 28 percent and 24 percent tax rates on construction and manufacturing industries would be reduced to 14 percent and 18 percent respectively, once the proposed amendments are enacted in Parliament.
In addition, the 28 percent corporate income tax rate on financial service providers in trading, banking, finance and insurance sectors is also proposed to be brought down to 24 percent from the current 28 percent.
However, the Minister noted that the government would be maintaining 40 percent corporate tax rate on sin industries— betting & gaming, liquor, and tobacco. Furthermore, the budget proposals on personal income taxes are also included in the bill.
The Minister revealed that the gazette notification would be issued with effect January 1, 2021.
The Ministry of Finance plans to complete the legislation process of all tax proposals presented in the Budget 2021 including special goods and services tax (GST) as well as the one percent tax rate on previously undisclosed funds, when the new tax year begins in April.
In particular, the ministry emphasized on the implementation of the proposed GST covering five items including vehicles, cigarettes and alcohol as well as granting amnesty for people who bring in earlier undisclosed funds subject one percent tax.
The bill is expected to be published on the government gazette shortly, before being tabled in Parliament for lawmakers’ approval.
The government expects to maintain the new tax framework, which aims for a simple, transparent and an effective tax system in force for its five-year term.