Effective January 1st, 2024, Sri Lanka’s Value Added Tax (VAT) is slated for a substantial adjustment, with the rate increasing from 15% to 18%. This change will impact various goods and services that were previously exempt, subjecting them to the 18% VAT. Additionally, many other goods will witness an increase in VAT from 15% to 18%.
Items such as diesel, petrol, and liquefied petroleum gas (LPG), which were formerly exempt, will now fall under the purview of VAT. However, the existing 7.5% Ports and Airport Development Levy on these products will be eliminated. Consequently, the overall tax burden on diesel and petrol will stand at 10.5%.
For liquefied petroleum gas (LPG) or cooking gas, there will be a net increase, as the 18% VAT replaces the current 2.5% port and airport development levy, resulting in an overall tax burden of 15.5%.
A published list of VAT-exempt goods includes electricity, wheat and wheat flour, baby formula, medicines and pharmaceutical ingredients, crude oil, kerosene, aviation fuel, agricultural seeds and plants, animal feed, textile yarn, and public passenger transport services. Locally produced handloom textiles, rice, rice flour, unprocessed agricultural and fish products will remain outside the VAT purview as well.
