Cabinet clears VAT, Finance Act amendments

• Digital tax delayed to July 2026

As the government advances tax policy changes outlined in recent budgets, the Cabinet this week approved amendments to both the Value Added Tax (VAT) Act and the Finance Act, clearing the way for the proposed bills to be gazetted and presented to parliament. 

The amendment to the VAT Act No.14 of 2002 seeks to implement several tax policy measures, including the postponement of VAT on services supplied through electronic platforms by mainly non-resident providers. The effective date for this tax has been deferred to July 1, 2026. The draft bill, prepared by the Legal Draftsman and cleared by the Attorney General, was submitted by the President in his capacity as Minister of Finance, Planning and Economic Development.

The Cabinet also approved amendments to the Finance Act No. 35 of 2018 to provide a tax concession for the telecommunications sector. The proposal exempts newly constructed telecommunication towers, erected on or after January 1, 2026, from the annual levy of Rs. 200,000 for a period of five years. The move is aimed at encouraging infrastructure expansion by mobile network operators.

The draft bill for this amendment has also received Attorney General clearance and will be published in the Government Gazette before being submitted to Parliament for approval.