Sri Lanka's VAT threshold stays at Rs 60 million: the cut to Rs 36 million was dropped

What changed, and what did not?

The VAT registration threshold did not change. A cut to Rs 36 million a year was proposed in the 2026 Budget, but the VAT (Amendment) Act No. 14 of 2026, certified on 30 June 2026, abandoned it. The Inland Revenue Department confirmed this in its notice of 3 July 2026.

You must register for VAT if your taxable supplies exceed, or are likely to exceed:

Some articles written after the Budget still quote Rs 36 million for VAT. They are out of date.

So where does Rs 36 million come from now?

From SSCL, the Social Security Contribution Levy. A separate law, the SSCL (Amendment) Act No. 10 of 2026, lowered the SSCL threshold from 1 July 2026:

The two thresholds used to match. Now they do not.

Who is affected?

Mainly businesses with annual turnover between Rs 36 million and Rs 60 million, or quarters between Rs 9 million and Rs 15 million.

Take a wholesaler selling Rs 11 million of goods every quarter, Rs 44 million a year. It stays below both VAT thresholds, so it still does not register for VAT. But it is over both new SSCL thresholds, so from the July to September 2026 quarter it must register for SSCL within 15 days of passing the threshold. As a wholesaler, its liable turnover is 50% of sales, so SSCL comes to Rs 11,000,000 × 50% × 2.5% = Rs 137,500 a quarter, paid monthly by the 20th.

How do you track your turnover against both thresholds?

Keep a running total, updated every month, for two windows at once: the current quarter and the last 12 months. Both VAT and SSCL test a quarter and a longer period, so one simple table covers both levies.

A worked example for a distributor, with quarterly turnover from its sales records:

Reading it against each test:

• VAT, quarter test: no quarter is over Rs 15 million. Not yet liable.
• VAT, 12-month test: Rs 53.5 million is below Rs 60 million. Not yet liable.
• SSCL, quarter test: the July to September 2026 quarter is Rs 14.5 million, over the new Rs 9 million threshold. SSCL registration is needed.
• SSCL, four-quarter test: Rs 53.5 million is also over Rs 36 million.

Now look ahead. If October to December 2026 is expected to bring in Rs 15.5 million, that quarter would pass Rs 15 million, and the four-quarter total would reach Rs 56.5 million. The VAT test also asks whether supplies are likely to exceed the threshold, so a business on this path should prepare to register for VAT before the quarter ends, not after.

What should you do now, step by step?

Work through these steps once now, then repeat the turnover check every month:

1. Pull your turnover for each of the last four quarters. Use your sales records or reports, not bank deposits, which mix in loans, transfers and customer credit being paid off.
2. Set up the running table above. One row per quarter, plus the four-quarter total. Update it when each month closes.
3. Check SSCL first. If any quarter since 1 July 2026 is over Rs 9 million, or the four-quarter total is over Rs 36 million, you need SSCL registration. Register within 15 days of passing the threshold.
4. Work out your liable turnover for SSCL. The levy is 2.5% of liable turnover, and the liable share depends on your sector: services and imports 100%, manufacturing 85%, wholesale and retail 25% to 50%. Check the exact share for your activity on the IRD's SSCL page.
5. Then check VAT. Over Rs 15 million in any quarter, or over Rs 60 million in 12 months, or likely to go over, means VAT registration too. The standard rate is 18%.
6. Get a TIN if you do not have one. You register as a taxpayer first. The IRD's e-Services registration page says this can be done in person, by post or online.
7. Apply for the tax type. The IRD's Application for Tax Type Registration (form TPR_005) covers both VAT and SSCL. For SSCL it asks for your turnover in the previous quarter and the previous year and your liable business activity with its activity code. For VAT it asks for your VAT-liable activity with its activity code, the date of your first taxable supply, and your estimated taxable supplies for the next 12 months. Online registration is also available through e-Services.
8. Diary the payment and return dates. SSCL and VAT are both paid monthly by the 20th of the following month. The SSCL quarterly return is due by the 20th after the quarter. The VAT quarterly return is due by the last day of the month after the quarter, filed online through RAMIS.
9. Ignore Rs 36 million for VAT. If an adviser, an article or a supplier uses it for VAT, ask them to check the IRD notice of 3 July 2026.

The full rules are in our guides to VAT in Sri Lanka and SSCL.

What mistakes should you avoid?

Three slips come up again and again:

• Looking only at the calendar year. The 12-month VAT test and the four-quarter SSCL test roll forward. A business can pass them in any month, not only in December.
• Treating the old SSCL threshold as current. Rs 15 million a quarter and Rs 60 million a year applied to SSCL until 30 June 2026. From 1 July 2026 they are Rs 9 million and Rs 36 million.
• Waiting for a bad quarter to pass. Being over the quarterly threshold once is enough. A strong festival quarter can trigger registration even if the year as a whole stays below the yearly figure.