VAT in Sri Lanka: rate, registration threshold, filing and what is changing

What is the VAT rate in Sri Lanka?

The standard VAT rate is 18%, in force since 1 January 2024. It applies to most goods and services a shop, wholesaler or restaurant sells. Financial services carry a separate rate of 20.5% for taxable periods from 1 July 2026, which does not affect ordinary traders.

Adding VAT to a price. You quote a customer Rs 50,000 before VAT.

• VAT at 18%: Rs 50,000 × 18% = Rs 9,000
• Price to the customer: Rs 59,000

Taking VAT out of a price that already includes it. Your shelf price is Rs 11,800 including VAT.

• VAT inside it: Rs 11,800 × 18 ÷ 118 = Rs 1,800
• Net price: Rs 10,000

Do not take 18% of the full price. Rs 11,800 × 18% = Rs 2,124, which overstates the VAT by Rs 324. The right fraction for an 18% price is 18/118. You can check any of these with the VAT calculator.

When do you have to register for VAT?

You must register when the value of your taxable supplies exceeds, or is likely to exceed, either of two thresholds:

Either test is enough. A plan announced in the 2026 Budget to cut the annual figure to Rs 36 million was abandoned. The VAT (Amendment) Act No. 14 of 2026, certified on 30 June 2026, keeps the thresholds above. Some reports still quote Rs 36 million; that is out of date. More on that in Sri Lanka's VAT threshold stays at Rs 60 million.

How does the threshold test work in practice?

Check two numbers at the end of every quarter: that quarter's taxable supplies, and the total for the last 12 months. Watch the current quarter as it goes too, because "likely to exceed" counts.

Here is a growing hardware wholesaler:

The business is still under Rs 60 million for the year, but one strong quarter took it over Rs 15 million. That is enough on its own. If by mid-September it already had firm orders that would take the quarter past Rs 15 million, it was "likely to exceed" before the quarter even ended.

Apply for registration through the IRD as soon as either test is met. The IRD publishes the name, address, Tax Registration Number and registration status of every VAT-registered person, so your business customers will be able to check you.

How does VAT relate to SSCL?

They are two separate taxes with separate thresholds. VAT is 18% charged on your sales. SSCL, the Social Security Contribution Levy, is 2.5% of a "liable" share of your turnover.

From 1 July 2026 the SSCL threshold fell to Rs 9 million a quarter or Rs 36 million over four quarters, while the VAT threshold stayed at Rs 15 million and Rs 60 million. So a business can owe SSCL without being VAT registered.

With an even spread, Rs 45 million a year is about Rs 11.25 million a quarter: over SSCL's Rs 9 million, under VAT's Rs 15 million. See the SSCL guide for how the levy is worked out.

When are VAT payments and returns due?

Most businesses file quarterly but pay monthly. VAT for each month is paid by the 20th of the following month. The quarterly return is due by the last day of the month after the quarter ends. Some taxpayers, such as eligible exporters and projects, file monthly instead.

Here is the calendar for the current quarter, with example amounts for a shop whose VAT on sales exceeds the VAT on its purchases:

Put the 20th of every month in your diary. Missing a payment while the return is still weeks away is the easy mistake to make.

How do you file through RAMIS?

All VAT returns and their schedules are filed online through the IRD's e-services (RAMIS) for taxable periods starting on or after 1 July 2025. Paper filing needs prior IRD approval.

You can send the schedules that support a return from the first day of the taxable period, rather than waiting until the end. RAMIS takes schedule records in three ways:

Refund requests are made inside the return itself; a separate refund instruction is no longer needed.

What happened to SVAT?

The Simplified VAT (SVAT) scheme was abolished from 1 October 2025. All SVAT registrations were cancelled and those businesses moved to the standard VAT system. SVAT credit vouchers and suspended tax invoices are no longer used.

In its place is a risk-based refund scheme. Eligible exporters (direct exports over 50% of total supplies in the previous calendar year) and approved projects receive refunds within 45 days of the return due date, if the return is filed on time. These businesses also file monthly.

What is changing for tax invoices and POS machines?

Two changes affect anyone who sells at a counter.

Tax invoice format. The IRD set a required format and specification for tax invoices by Gazette No. 2463/05 of 17 November 2025. Its start date was first 1 January 2026, then postponed to 1 April 2026. Check the IRD for the current start date and the exact fields before you change your invoices. From 1 July 2026, failing to issue valid tax invoices is an offence under the VAT Act. For offences on or after 1 October 2025, the penalty on conviction is a fine of up to Rs 1,000,000, up to six months' imprisonment, or both.

Secured POS machines. The 2026 Amendment Act requires every VAT-registered person to use secured point-of-sale machines for all transactions, invoices and records, within three months of a date the IRD will prescribe. The machine specification has not been published yet. Until it is, no seller can say its till meets the rule. Watch IRD notices and plan for a three-month window.

Penalties for tax evasion and fraudulent refund claims also rose. For offences on or after 1 October 2025: a fine of twice the tax evaded, plus a fine of up to Rs 1,000,000 or up to six months' imprisonment, or both.