COPF approves VAT Amendment Bill with conditions

Colombo, June 23 (Daily Mirror) - The Committee on Public Finance (COPF) has approved the Value Added Tax (VAT) (Amendment) Bill, subject to specific conditions imposed by the committee.

The meeting was held at Parliament under the chairmanship of MP Dr. Harsha de Silva, with the participation of Deputy Ministers Dr. Kaushalya Ariyaratne and Nishantha Jayaweera, along with MPs Ravi Karunanayake and Harshana Rajakaruna. MPs Wijesiri Basnayake, Attorney-at-Law Chitral Fernando, and Nimal Palihena joined the proceedings virtually.

The committee engaged in an extensive discussion on proposed amendments to the Value Added Tax Act No. 14 of 2002, with particular focus on the taxation of digital services provided by non-resident suppliers.

Members compared the tax impact on locally registered and foreign-registered digital service providers, noting that a disparity in consumer pricing may still persist even after the amendment. Concerns were also raised over the potential impact on Sri Lankan digital entrepreneurs competing in global markets. Officials from the Ministry of Finance stated that Sri Lanka’s digital VAT framework is aligned with systems adopted in countries such as India and the Philippines.

The committee also examined the reduction of the VAT registration threshold from Rs. 15 million per quarter to Rs. 9 million, which officials said could bring around 10,000 new businesses into the tax net. Concerns were raised about the financial burden on SMEs, particularly regarding compliance costs, including the estimated Rs. 200,000 required for Point of Sale (POS) systems.

Lawmakers urged authorities to introduce supportive measures for small businesses and reduce reliance on heavy penalties, which could reach up to Rs. 1 million for non-compliance. In response, Deputy Minister Nishantha Jayaweera said the government is considering incentives to encourage POS adoption.

Following a three-hour review, COPF approved the bill on condition that executive regulations made under the Act be submitted to the committee for approval before gazetting.

In addition, the committee approved two orders under the Special Commodity Levy Act No. 48 of 2007 related to food imports. One order increases the levy on imported maize from Rs. 25 to Rs. 50 per kilogram.

Members cautioned that increases in maize import duties should be carefully assessed due to potential impacts on animal feed costs and prices of essential protein sources such as chicken and eggs.

The committee also approved regulations issued under the Import and Export (Control) Act No. 1 of 1969 published in Gazette Extraordinary No. 2487/29 dated May 07, 2026.