Budget 2027: Sri Lanka Exempts Books from VAT, Recognizes E-Invoices, and Refines Exporter Rules

Sri Lanka has unveiled a sweeping set of amendments to the Value Added Tax Act, No. 14 of 2002, in the 2027 Budget Speech, headlined by the removal of VAT on educational books and printed materials alongside key compliance modernizations for businesses. Under the new proposals, the import and supply of printed books, exercise books, dictionaries, encyclopedias, children’s picture and coloring books, printed music, and single-sheet printed matter are fully exempt from VAT. Conversely, the government has moved to remove existing VAT exemptions on artemia eggs and coconut coir pith, bringing both commodities back into the tax net.

Beyond product exemptions, the budget introduces significant administrative and sector-specific reforms aimed at streamlining tax compliance and supporting trade. Digital and electronic tax invoices will now carry the same legal validity as paper-based invoices, with technical standards and formats to be gazetted by the Commissioner General of Inland Revenue (CGIR). To support newly established export ventures, the definition of an “eligible exporter” will be broadened to include newly VAT-registered entities that derive more than 80% of their turnover from exports over the preceding six months. Additionally, businesses conducting transactions in foreign currency will be required to apply the Central Bank of Sri Lanka’s indicative exchange rate, as specified by the CGIR, when converting amounts into Sri Lankan rupees for VAT calculations.

The 2027 fiscal blueprint also restructures VAT liabilities for the local cinema industry. Going forward, the VAT obligations of film producers, distributors, cinema hall operators, and the National Film Corporation will be calculated strictly based on each party’s respective share of ticket revenue, assessed on the ticket value after Entertainment Tax but prior to VAT. All proposed measures will come into effect upon the passage of the formal legislative amendments to the Value Added Tax Act.