Sri Lanka is introducing a Special Goods and Services Tax (GST) that will apply to specified goods and services. The new GST does not replace Sri Lanka’s existing VAT system. Rather, it is an additional special tax.
The new Special GST is one of several interventions announced by Finance Minister Basil Rajapaksa in his 2022 budget speech. The GST was also announced in the previous year’s budget, but was not implemented because of the Covid-related economic downturn.
Goods and services covered by the Special GST
Sri Lanka’s new GST applies to five categories of goods and services:
- Betting & gaming
The finance minister also announced an increase in excise and a five rupee increase on the cigarette tax.
Increased VAT on financial services in Sri Lanka
From 1 January 2022 to 31 December 2022, the applicable VAT rate for certain financial services companies increases from 15% to 18%.
In addition, the finance minister announced a one-off surcharge on large firms. The surcharge only applies to companies with a taxable income exceeding 2 billion rupees. The surcharge thus affects 62 large companies in Sri Lanka.
Road accident tax
The finance minister also proposed a tax on motor accidents. According to the proposal, cars involved in an accident would be subject to a special tax. The tax would be reclaimable through insurance.
According to Rajapaksa, the initiative aims to lower the number of accidents in Sri Lanka. However, he did not outline how the tax will work in practice.
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