There has been no imposition of any new or additional Value Added Tax (VAT) on the public, stated Deputy Minister of Economic Development, Dr Anil Jayantha Fernando, addressing the media today (8 July).
Responding to concerns over the VAT applicable to digital services in Sri Lanka from 1 October 2025, the Deputy Minister clarified that the recent gazette only outlines the method of collecting existing VAT on digital services and how it should be remitted to the Inland Revenue Department.
He explained that the gazette has not introduced a new tax, and that certain media reports had misinterpreted the document, creating the false impression that an entirely new VAT has been imposed.
The Deputy Minister further stated that the existing VAT Act has merely been amended to streamline tax collection mechanisms, particularly in relation to digital services. These changes were proposed through the national budget and subsequently passed by Parliament.
He clarified that the VAT on digital services is not a newly created tax, and it applies to digital services whether provided locally or internationally. The tax is not based on who supplies the service but on the nature of the service itself. He noted that this tax was already in place and had been challenged in court, where its legal basis and fairness were clarified.
Following these developments, the group liable for the tax is now required to collect and remit it starting from 1 October 2025, although the original enforcement date was 1 April 2025.
He stressed that the recent gazette notification does not amount to a new tax but is merely a clarification on implementation and compliance.
