In a significant fiscal adjustment, Sri Lanka’s Value Added Tax (VAT) rate rises from 15% to 18% starting January 1st. This revision extends to a broad spectrum of goods and services, impacting previously exempt items.
Diesel, petrol, and liquefied petroleum gas (LPG), formerly exempt, are now subject to the 18% VAT. Despite the removal of the existing 7.5% Ports and Airport Development Levy on diesel and petrol, the overall tax burden settles at 10.5%. However, the VAT amendment results in an increased tax load of 15.5% on liquefied petroleum gas.
Additionally, the price of alcohol sees a 3% increase from January 1st, as confirmed by the Department of Excise.
Consumers will also experience elevated telephone charges, reflecting a 3% VAT increment. Telecommunication providers clarify that this translates into a total tax percentage of 38.4%, reaching nearly 42% with the VAT amendment. Internet services, currently taxed at 20.3%, will also witness an uptick to 23.5%.
Piyal Pathmanatha, Deputy General Manager, announced a 3% VAT augmentation on water bills, effective this month.
In the transportation sector, L Rohana Perera, Secretary General of the National Joint Three-Wheeler Drivers and Manufacturers Association, discloses an increase in the second-kilometer rate from Rs.80 to Rs.100.
Harshana Rukshan, President of the All Ceylon Restaurant and Restaurant Owners Association, states that the cost of a rice packet will surge by Rs.25 starting January 1st.
These adjustments come as part of the government’s efforts to address economic challenges and stabilize fiscal conditions in the country.
