President asserts no sector will be exempted from VAT, including IT

The increase in Value Added Tax (VAT) will be applicable to all sectors across the board, and no industry, including

IT, will be exempted from the policy that will go into effect from January 1, 2024, asserted President Ranil Wickremesinghe. 

Responding to questions and concerns raised about the 18 percent VAT for the IT sector, Wickremesinghe said the industry would not be burdened by the policy since the majority of the companies are export-oriented and the export of IT services is a zero-rated supply. 
He also clarified that IT services provided to entities outside Sri Lanka, with payments received in foreign currency, would be exempted from income tax.

“...even in India, the GST rate for all kinds of IT software supply services products is 18 percent. Now, we have decided as a policy to impose an increase in the VAT up to 18 percent. Then it must apply to all sectors. You can’t exempt some sectors and others,” Wickremesinghe told parliament yesterday.
He also said that although many in the IT sector have indicated their ability to navigate the new VAT policy, there are dissenting opinions from a few, yet there is limited room for adjustments.

He referred to the past when the IT sector was against bringing in Tata back in 2003 and bringing in foreign personnel in 2015.
“...this was the biggest debate. And finally, there were no foreign personnel and half the people who shouted are now leaving the country. We’re having a serious dearth of people. So what we are doing now is to ask if any company wants people from abroad, we’ll allow it,” said Wickremesinghe.

He pointed out that the revenue collected by increasing VAT to 18 percent will come back to the sector since Rs. 1.5 billion has been allocated for AI research and Rs. 8 billion for other technological research.
Wickremesinghe expressed confidence in the IT sector expanding in the future. “You might pay 18 percent VAT but you are going to expand here in Sri Lanka and that’s the development,” he said.