Press briefing of Cabinet Decision taken on 2016-09-13

Amendments to the Act on Value Added Tax

- As per the Budget proposals 2016, the decision taken at the special Cabinet Meeting held on 2016-03-04 and in accordance with the recommendation of the Cabinet Committee on Economic Management (CCEM) held on 2016-06-15, it was decided to revise the provisions pertaining to the VAT under the Value Added Tax Act, No.14 of 2002. Accordingly, the proposal made by Hon. Ravi Karunanayake, the Minister of Finance, to publish the Value Added Tax (Amendment) Bill amended incorporating the following proposals, in the Government Gazette instead of the Bill submitted previously with regard to the VAT amendment and thereafter to present same in Parliament for approval, was approved by the Cabinet:

(i) Fixing VAT rate at 15%;

(ii) Reduction of the threshold of Registration for VAT from Rs.3.75 million per quarter or Rs.15 million per annum to Rs.3 million per quarter or Rs.12 million per annum;

(iii) Imposition of VAT on the following goods and services

* Wholesale or retail trade valued more than Rs.50 million per annum (i.e. Rs.12.5 million per quarter);

* Private health services other than OPD services that do not contain diagnostic tests, dialysis and medical consultancy services;

* Telecommunication services;

* Tobacco products;

* Powdered milk containing added sugar or other sweeteners;

* Air ticketing fee of Air passengers moving from an airport in Sri Lanka to an airport outside Sri Lanka;

(iv) Restriction of the VAT exemption applicable on the supply, lease or rent of residential accommodation services carried out by projects of which the investment cost does not exceed US$ 05 million, other than services made by Strategic Development Projects (SDPs) approved prior to 2015-11-01 or by SDPs and other projects where the sales agreements are entered into or project completed before 2016-10-01.

(v) Increase of the piece rate of garments supplied to the local market by companies registered under the Sri Lanka Board of Investment (BOI) up to Rs.75/- per piece.