Treasury Secretary Mahinda Siriwardena 

By Charumini de Silva

Despite the broader tax reform agenda focusing on eliminating value-added tax (VAT) exemptions, Treasury Secretary Mahinda Siriwardena this week clarified that specific exceptions for essential fuel are poised to remain intact. 

“The Government will not impose VAT for essentials like electricity, kerosene and naphtha,” he said responding to a query posed at the ‘Sri Lanka Economic Summit 2023’ organised by the Ceylon Chamber of Commerce on Wednesday.

Siriwardena explained the decision in the context of the Government’s broader efforts to phase out most VAT exemptions, as part of the comprehensive strategy aimed at increasing revenue to sustain its functions. 

He also said the Government is considering removing or reducing the Port and Airport Levy (PAL).

Separately, in a post-Budget debate in Parliament, SJB MP Dr. Harsha de Silva revealed that VAT will be imposed on previously untaxed items such as fuel and gas, claiming that the President did not mention any during his Budget speech. 

“It is an unfair move. The public must know what goods and services include VAT and the Government’s revenue collection sources,” Dr. de Silva added.

In October, the Government announced plans to hike VAT from 15% to 18% from January 2024 to meet the revenue targets set by the International Monetary Fund (IMF).

Siriwardena acknowledged the existence of various taxes on petrol and diesel, including excise tax and custom levies, reflecting the multifaceted approach taken in tax administration.

The Treasury Secretary admitted the complexities and considerations involved in balancing fiscal responsibilities amid commitments for tax reforms.

IMF approval of 2nd tranche due on 14 December