Value Added Tax​ (VAT)

Value Added Tax (VAT) is introduced by Act No.14 of 2002 and is in force from 1^st August, 2002. VAT Act replaced the Goods and Services Tax (GST) which was almost similar to tax on the consumption of goods and services.

It is a tax on domestic consumption of goods and services. The goods imported into Sri Lanka and goods and services supplied within the territorial limits of Sri Lanka are the subject matter of this tax. It is a multi-stage tax levied on the incremental Value at every stage in the production and distribution chain of Goods and Services. The tax is borne by the final or the ultimate consumer of Goods or services. It is an indirect tax and the Government will receive at the end, through all the intermediary suppliers in the chain of production and distribution, an amount equal to the amount paid by the final consumer.

There are certain supplies of goods and services exempt from VAT. 

​Chargeability for Value Added Tax excluding charge ability on Financial Services

• Manufacturers
• Importers
• Services providers​
• ​​Suppliers who supply goods under the tender agreement 
• Wholesale and Retail Trade​

Registration Threshold

• Value of taxable supply of goods or services other than financial services by any person including wholesale and retail trade (with effect from 01.10.2022)
  • exceeds Rs. 20 million per quarter, exceeds Rs. 80 million per annum
• Value of supply of financial services by a specified institution or another person
  • exceeds Rs. 3 million per quarter, exceeds Rs. 12 million per annum
• Voluntary Registration
  • irrespective of the registration threshold any person who carries on or carries out a taxable supply can make an application for voluntary registration

VAT Rates

1. Zero Rate (0%)
   1. Exports
   2. On Exports of goods or services, supply of services by a hotel, guest house, restaurant or other similar businesses providing similar services, registered with the Sri Lanka Tourism Development Authority, with 60% of the total value of the inputs are sourced from local supplies/sources (from 01.12.2019 to 31.05.2022)
2. Standard Rate
   1. Prior to 01.06.2022 - 8%
   2. From 01.06.2022 to 31.08.2022 - 12%
   3. From 01.09.2022 - 15%
3. Higher Rate - on supply of financial services
   1. Prior to 01.01.2022 - 15%
   2. From 01.01.2022 - 18%

Registration for VAT

The TIN Certificate should be obtained from Primary Registration Unit and VAT registration could be obtained from the Tax Registration Unit at the 2^nd Floor of the Inland Revenue Headquarters or from any nearest Regional Office of the Department.

The application should be made through the Tax Type Registration Form (TPR_005_E), not later than fifteen days from the date on which became liable for registration.

Documents Required for Registration

• TIN Certificate​
• Certificate of Business Registration
• In the case of a limited liability company
  • Memorandum & Articles of Association
  • List of Directors
  • Certificate of incorporation
• Copies of NIC of the proprietors/Directors of the business​
• Particulars of sales to prove the turnover & monthly Bank statements to prove cash receipts.
• Documents to prove that exports were made continuously by such exporters
• For 22(7) registration - Project Plan
  • a copy of agreement with the Board of Investment(if any)
  • a deed or rent/lease agreement of property
  • sources of funds to the project to be proved for non-BOI projects
  • a list of intended purchases – local & imports

Responsibilities of a Registered person

• Display the Certificate of Registration at a clearly visible place in the business premises.
• Issue tax invoices (to other registered persons).
• Keep accounts for relevant periods.
• Pay taxes and furnish returns on or before due dates.
• Inform the Department any change in the following without delay.
  • Name,
  • Business Place,
  • Ownership,
  • Nature of business etc.

VAT Payments

Any Person or Partnership who supplies goods or Services is required to make the payment for the particular month on or before the 20^th day of the following month.

Furnishing VAT Returns

Due date : 

• On or before the last day of the month after the expiry of each taxable period (may be monthly or quarterly)