Sri Lanka Revises VAT Exemptions Starting 2024 (Complete List)

The Inland Revenue Department of Sri Lanka has announced an update to the list of goods and services exempted from Value Added Tax (VAT) beginning January 1, 2024. The changes are part of amendments to the VAT Act passed in 2023.

Key highlights of the revised VAT exemptions include:

• Several essential food items like wheat, wheat flour, and infant milk powder will remain VAT-exempt.
• Healthcare services and medications will continue to be VAT-free, except for hospital room charges.
• Financial services such as bank accounts, loans, and insurance will stay exempt.
  
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• Import duty waivers are provided on certain products like aircraft parts and goods for government infrastructure projects funded by foreign loans.
• Exports, education, and public transportation continue to be zero-rated.

The update aims to optimize VAT collections while minimizing the impact on low-income groups. The change comes amidst rising cost of living and a widening budget deficit.

The new VAT rules follow several recent tax policy changes in Sri Lanka including an increase in VAT from 15% to 18%.