Govt. to remove VAT exemptions except for health, education and few essential foods

The government yesterday said the Value-Added Tax (VAT) would be increased to 18 percent in January 2024, along with the elimination of almost all VAT exemptions, except for products relating to health, education and few essential foods.
According to the 2024 budget speech delivered to Parliament yesterday, this will bring Sri Lanka’s VAT rate in line with the regional peers such as India and Pakistan.

It also said a gazette notification would be issued to implement the increase of the VAT rate, with effect from January 1, 2024.
The Cabinet of Ministers earlier this month approved a proposal to increase the current VAT rate by 3 percent to 18 percent. 
“Once the resulting VAT collections enable the overall tax targets to be met, it will be possible to phase out the other indirect taxes such as the Social Security Contribution Levy (SSCL) and rationalise the Special Commodity Levy (SCL), which are distortive in nature,” the budget speech said.
VAT is a consumption tax levied on goods and services ultimately paid by the end consumer. It is often considered a regressive tax because it tends to have a disproportionate impact on the lower-income individuals and households.
According to the 2024 budget estimates, the government plans to raise Rs.2,235 billion from the taxes on goods and services, substantially higher from the 2023 estimate of Rs.1,376 billion.