ECONOMYNEXT – Sri Lanka will reduce the threshold for value added tax to 36 million rupees a year from the current 60 million rupees, effective April next year, according to a budget for 2026.
Some businesses which were splitting their businesses in two avoid paying VAT will be brought in to the VAT by reducing the threshold, he said.
The maximum import duty rate will be raised from 20 to 30 percent, though para tariffs will be phased out.
Sri Lanka has high protectionist taxes made up of import duties, CES and PAL, which has made inputs expensive and blocked export diversification unlike in free trading East Asia.
High para tariffs as well as import duty has also allowed politically connected businesses to exploit customers to with high prices, in building materials and other products.
There are very high food taxes, which critics say has promoted malnutrition.
the current import duty bands of 0, 10 percent, 15 percent and 20 percent, will be increased to 0, 10 percent, 15 percent, 20 percent, 30 percent.
A 100 rupee a kilogram CESS on imported fabric to be removed and replaced with value added tax, as in the case of local fabric.
A social security contribution levy will be imposed on cars from April 2026.
RELATED : Sri Lanka budget 2026 targets deficit of 5.1-pct, 2025 out-turn 4.5-pct
(Colombo/Nov07/2025)