Sri Lanka abandons single band VAT with triple layer and plans to tax weddings and related services at a higher rate of 18%

The government abandons single band VAT and is planning to tax weddings and wedding services, and reception hall rentals at a new higher rate of 18 percent. The government abandons single band VAT and is planning to tax weddings and wedding services, and reception hall rentals at a new higher rate of 18 percent. “The single rate VAT reflects regressive characteristics in our tax system. The taxing luxury motor vehicles and an essential commodity like Dhal at the same rate of 15 percent while exempting precious Gem and Gold is not socially reasonable, however strong the argument may be for a single rate tax,” Finance Minister Sarath Amunugama said during the government’s 2005 budget presentation on Thu.

A single rate will be replaced by a three tiered system – a 5 percent basic commodity rate for essential food items, 18 percent luxury rate for selected consumer items. The standard rate of 15 percent will apply for general items.

With this, value added tax on sugar, dhal, potatoes, onions, dry fish, milk powder, vegetables and chilies will come down to five percent from 15 percent.

Input tax credit under items taxed at basic rate of 5 percent wi