Tax experts say lower VAT threshold could strain market

The reduction of Sri Lanka's Value Added Tax (VAT) and Social Security Contribution Levy registration thresholds from Rs.60 million to Rs.36 million per year is expected to have a significant impact on the market next year, according to KPMG Sri Lanka Head of Tax and Regulatory Suresh Perera.

- By SHANNINE DANIEL

"As expected, the government has not introduced new taxes but has called for certain changes to the existing tax structures. There will also be many changes in the tax administration and tax concessions" Perera said.

Budget 2026 estimates total revenue at Rs.5,305 billion, with Rs.4,850 billion expected from taxes and Rs.455 billion from non-tax revenue and grants. Tax revenue will mainly come from VAT, taxes on external trade and excise taxes, while non-tax revenue includes interest income, rents, dividends, profits and fees. Perera said the lowered VAT threshold was likely to be unpopular.