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The wholesale and retail trade which was previously taxed at 11 percent has been exempt from VAT in the budget 2016 and that will result in a price fall in many goods, the ministry said.
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The Ministry added that since imported and domestically manufactured goods are now taxed at 8.
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0 percent instead of 11.00 percent earlier, prices of most imported goods will also fall.
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The Finance Minister Ravi Karunanayake presented budget 2016 to Parliament last Friday.
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In his speech Karunanayake said the VAT system in Sri Lanka is severely distorted due to the ad hoc policies adopted from time to time over the past few years.
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Under-invoicing of imports, leakages in the value chain and a long list of exemptions resulted in low revenue which was below the expectations, he said. Due to that, the new budget proposed to remove certain exemptions with the view to increase revenue.
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The present single rate will be revised to 3 bands 0 percent, standard rate of 8 percent and 12.5 percent higher rate for service sector and the minimum threshold for the liability for VAT will be 12 million rupees per annum.
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The wholesale and retail trade will be excluded from VAT.
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