The Inland Revenue Department (IRD) has announced that locally produced liquid milk and yogurt are now exempt from Value Added Tax (VAT), following the enactment of the Value Added Tax (Amendment) Bill.

According to a statement issued this week, the exemption came into effect on 11 April, the date on which the bill received parliamentary assent from Speaker Jagath Wickramaratne. The bill was passed in Parliament on 9 April.

To qualify for the VAT exemption, liquid milk products must contain a minimum of 50 percent fresh milk, the department clarified.

In addition to dairy products, VAT has also been removed on naphtha supplied by the Ceylon Petroleum Corporation (CPC) to the Ceylon Electricity Board (CEB) for the purpose of electricity generation.

The amendment further introduces new tax provisions targeting the digital economy. With effect from 1 October, VAT will be imposed on digital services provided by non-resident entities to consumers in Sri Lanka via electronic platforms. This measure is in line with international efforts to tax cross-border digital transactions.

Furthermore, all individuals and entities engaged in the commercial import or export of goods are now required to register under the revised VAT framework, as part of efforts to enhance compliance and revenue collection.