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Sri Lanka’s VAT Shift: Lower Threshold, and Inflation Concerns

Sri Lanka’s Value Added Tax (VAT) increase to 18% from January 2024 onwards along with reduction of VAT threshold to Rs. 60 million and removal of VAT exemptions from 97 items out of 138 goods is expected to increase the inflation by 2.5%, State Minister of Finance Ranjith Siyambalapitiya said.

Siyambalapitiya said that with the expected increase in inflation by 2.5%, the inflation will surpass the CBSL target of 5% as inflation in November stood at 3.4%.

The Budget 2024 said that the VAT rate will be increased up to 18% in January 2024 along with elimination of VAT exemptions other than for products relating to health, education, and a few essential foods. This brings Sri Lanka in line with regional peers including India and Pakistan, in terms of standard VAT rate.

Source: https://publicfinance.lk/en/topics/vat-increase-inflation-expected-to-increase-by-2-5-1702276627#:~:text=Sri%20Lanka’s%20Value%20Added%20Tax,of%20Finance%20Ranjith%20Siyambalapitiya%20said.

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