Opposition questions Govt. on VAT threshold plans

Saturday, 22 August 2026 01:08 - - {{hitsCtrl.values.hits}}

Ravi K probes return of aborted VAT threshold reduction at CoPF, Deputy Minister Jayaweera confirms no

2026 Budget proposed reducing threshold to Rs. 36 m; Govt. withdrew plan over SME concerns

The Government has made no decision to revive its shelved plan to lower the Value Added Tax (VAT) registration threshold from Rs. 60 million to Rs. 36 million in annual turnover, Economic Development Deputy Minister Nishantha Jayaweera told the Committee on Public Finance (CoPF), as Opposition MP Ravi Karunanayake pressed the Government on widening the tax base.

During the exchange, Karunanayake asked when the previously proposed threshold reduction, which was withdrawn in June, would be implemented.

“No decision has been taken to reduce the threshold for VAT,” Jayaweera said.

When Karunanayake sought clarification on whether the measure had merely been postponed and when it could be reintroduced, Jayaweera reiterated: “No decision has been taken to re-implement that reduced threshold.”

The proposed reduction from Rs. 60 million to Rs. 36 million had been included in the 2026 Budget and was expected to bring around 10,000 additional businesses into the VAT net.

The Government, however, withdrew the proposal in June, retaining the Rs.60 million annual turnover threshold after concluding that lowering it would add pressure on SMEs already facing the economic consequences of Cyclone Ditwah and the conflict in the Middle East.

Karunanayake returned to the revenue implications of retaining the higher threshold, arguing that Sri Lanka needed to expand the tax base rather than continue placing the burden on taxpayers already within the system.

IRD figures presented to the Committee showed 36,656 VAT-registered taxpayers as at 30 June 2026, excluding 371 taxpayers registered for VAT on financial services. The Department also reported 139,000 registered corporate taxpayers.

Karunanayake questioned the gap between the broader taxpayer population and the VAT base, noting that the abandoned threshold reduction had been expected to add around 10,000 taxpayers.

“The quicker we get them into the threshold and get it moving, it is better for the overall system because we are taxing the existing taxpayer and the tax base is not broadening,” he said.