VAT Cut to Rs. 36m Threshold Draws SME Pushback
Sri Lanka’s decision to lower the VAT and SSCL registration threshold from Rs. 60 million to Rs. 36 million has sparked concern among small and medium businesses, which warn that the new rules could increase retail prices and squeeze margins. The government says the move aims to broaden the tax base after the number of VAT-registered entities collapsed by 71 percent when the threshold was raised in 2019.
Small traders argue that compliance costs alone will force them to pass the 18 percent VAT to consumers, potentially raising prices on essential goods. However, officials note that recent reductions in energy costs and past threshold cuts did not fuel inflation. The Treasury expects higher revenue particularly from retail and services while analysts say the reform will curb tax avoidance and re-formalise businesses that previously operated below the tax radar.
