The highlights of tax revision proposals presented in the National Budget 2025 for the current year, which may be implemented after formal amendment to the relevant legislation.
| Subject | Current Position | Proposed Amendment |
| 1. Value Added Tax (“VAT”) – Value Added Tax Act, No. 14 of 2002, as amended | ||
|---|---|---|
| Exemption | Import of any packing material is liable for VAT | Exemption from VAT on the import of packing materials for packing pharmaceuticals or Ayurvedic medicines manufactured in Sri Lanka and imported by the manufacturer, subject to the condition that such materials are not locally produced and approved by the Secretary to the Ministry of Health or the Commissioner of the Department of Ayurveda. |
| Exemption | Local purchases and imports by Businesses of Strategic Importance (BSIs) operating within the Colombo Port City, under the Colombo Port City Economic Commission Act No. 11 of 2021, are subject to VAT. | Supply of goods or services by/to any a business identified and approved as a BSI to be exempted, retrospectively with effect from 01.01.2024. Exemption on all transactions to include local purchases and imports by BSIs from VAT. |
| Replacing Simplified Value Added Tax (SVAT) | Transactions as between SVAT registered people allow for VAT suspension as per the SVAT scheme. | SVAT scheme to be replaced by a risk-based refund system – the proposed effective date of change is 01.10.2025. To ensure a smooth transition, a pilot project by will be implemented by the Inland Revenue Department (IRD), facilitating VAT refunds through the RAMIS system. Relevant conditions to be set out by Order published in a gazette. |
| Revisions to VAT base on entertainment tickets | ‘Entertainment tax’ levied on admission payments for events by a local authority is included in the VAT base. Thus, VAT is applied to/ calculated on both the ticket price and the Entertainment Tax. | Entertainment tax to be excluded from the VAT base. |
| Disallowance | No specific provisions in this regard. | The input tax credit deferred at the time of importation of capital goods such as machinery, equipment or vehicles for projects to be disallowed. |
| Write off | No specific provisions in this regard. | VAT arrears as recorded by the Commissioner General of Inland Revenue in relation to construction projects undertaken for Tsunami reconstruction to be written off. |
| Administrative Considerations | Use of Point of Sale (POS) Machines by VAT registered persons to be made mandatory. | |
| 2. Social Security Contribution Levy (“SSCL”) – Social Security Contribution Levy Act No.25 of 2022, as amended | ||
| Expansion of Scope of Exemption | Turnover from transportation of goods and passengers is exempt from SSCL. | Definition of “transportation of goods and passengers” to include services provided in relation to international transportation by container terminal operators. |
| Wholesale and retail trade of petrol, diesel or kerosene sold at a filling station is exempt from SSCL. | The sale of petrol, diesel, and kerosene will be exempt from SSCL, regardless of whether the sale occurs at a filling station or any other location. | |
| Limiting the Exemption | Import and local sale (by a manufacturer) of any machinery or equipment for the purpose of generating electricity by the Ceylon Electricity Board (“CEB”) or any institution which has entered into an agreement with the CEB to supply electricity, based on the HS code as approved by the Minister of Finance is exempt from SSCL. | Exemption is set to be restricted to machinery or equipment imported or purchased locally for the purpose of generating electricity by any institution which has entered into an agreement with the CEB prior to 18.02.2025. |
| 3. Stamp Duty – Stamp Duty Act (Special Provisions) No.12 of 2006 as amended | ||
| Increase in Rates | An instrument related to the lease or hire of any property (movable and immovable) is subject to Stamp Duty at a rate of 1% on the total lease or hire value, including any premium. | Rate to be increased to 2%. with effect from 01 March 2025. |
| 4. Betting and Gaming Levy – Betting and Gaming Levy Act No. 40 of 1988, as amended | ||
| Increase in Rates | A monthly levy of 15% is payable on the operator’s gross collection (i.e., total gross collection from the business of gaming. | To be increased to 18%. |
| Increase in Fee | Casino Entrance Levy of USD 50/- is collected, from any Sri Lankan citizen who enters such place of business of gaming. | To be increased to USD 100/-. |
The Budget also acknowledged the key revenue measures announced in Parliament in December 2024- the subject areas being VAT exemption on fresh milk and yoghurt and introduction of VAT on digital services.
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For further information, please contact:
Inshira Hanifa, Partner, D.L & F & De Saram
inshira@desaram.com
