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Find out information on value added tax in Sri Lanka.
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Value Added Tax in Sri Lanka

Value Added Tax, popularly known as ‘VAT’, is a special type of indirect tax in which a sum of money is levied at a particular stage in the sale of a product or service. Value Added Tax (VAT) in Sri Lanka was introduced by the Act No.14 of 2002 and is in force from 1st August, 2002. VAT Act replaced the Goods and Services Tax (GST) which was almost similar tax on the consumption of goods and services.
It is a tax on domestic consumption of goods and services. The goods imported into Sri Lanka and goods and services supplied within the territorial limits of Sri Lanka are the subject matter of this tax. It is a multi stage tax levied on the incremental Value at every stage in the production and distribution chain of goods and services. The tax is borne by the final or the ultimate consumer of goods or services. It is an indirect tax and the Government will receive at the end, through all the intermediary suppliers in the chain of production and distribution, an amount equal to the amount paid by the final consumer.
VAT is not charged on certain imports and on retail and wholesale supply of goods. There are certain supplies of goods and services, which is exempt from VAT. For any taxable period commencing on or after January 1, 2009, the VAT is charged at the rate of twelve per centum.
The government estimates the current rate of VAT will provide a substantial relief to tourism, industries, leasing, construction insurance and telecommunication sectors and also to the entire production sector. With reduced production costs, the overall cost-of-living will also come down.
The 20 percent VAT on motor vehicles, luxury goods and liquor will continue to be applicable. The registration limit applicable to VAT will be increased from Rs. 1.8 million to Rs. 2.5 million to simplify VAT administration and also to provide relief to small and medium entrepreneurs.

Last Updated on: 19-05-2010

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