Opposition Leader Sajith Premadasa has sharply criticized the government’s proposed Value Added Tax (VAT) amendments, warning that the sweeping changes set to take effect from July 1 will suffocate businesses rather than spur growth.

“Sri Lanka widens the VAT net, raises rates, and tightens enforcement all at once. SMEs dragged in. Financial services taxed higher. Digital economy captured. And compliance burden increased. This isn’t reform. It’s extraction. You cannot tax an economy into growth. If businesses can’t breathe, they won’t survive or thrive. And if they don’t survive what exactly will be left to tax?” he said in a statement on ‘X’.

The VAT Amendment Bill, released on April 29, proposes reducing the registration threshold from Rs. 60 million to Rs. 36 million annually, pulling more small and medium enterprises into the tax net. It also introduces VAT on digital services provided by non-resident companies to Sri Lankan consumers, and raises VAT on financial services from 18% to 20.5%.

Stricter enforcement measures are included, with fines for tax offences increased to Rs. 1 million and possible imprisonment of up to six months. VAT‑registered businesses will also be required to adopt Inland Revenue Department‑approved secured point‑of‑sale systems for real‑time transaction reporting.

The Bill further provides for public disclosure of registered taxpayers, revised input tax rules, and exemptions for strategic businesses under the Colombo Port City framework. (Newswire)

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