Cabinet approves decision to hike VAT to 18%

Cabinet approval has been granted to increase Value-Added Tax (VAT) to 18 percent from the current 15 percent with effect from January 1, 2024, Cabinet Spokesperson Minister Bandula Gunawardana said a while ago.

He said even though tax income has risen over 50 percent in the first nine months of 2023 compared to 2022, such income has not yet reached the targets set by the International Monetary Fund (IMF).

“Sri Lanka so far hasn’t got the second IMF tranche because we couldn’t meet the revenue targets set by the IMF,” Gunawardana said, explaining the rationale behind the Cabinet’s decision to approve the VAT increased proposed by the President Ranil Wickremesinghe in his capacity as the Minister of Finance.

The Department of Government Information has announced that, in addition to raising the VAT rate, the new rate will also be applied to specific goods and services that were previously exempt from VAT.