Economic Development Deputy Minister Nishantha Jayaweera has clarified that the planned Value Added Tax (VAT) revision from July 1, 2026 is intended to simplify the tax system, not increase taxes.
Addressing media on May 4, the Deputy Minister refuted reports—particularly circulating on social media—claiming that the الحكومة plans to raise VAT to 20.5 percent.
He explained that the reform will merge the existing VAT and the Social Security Contribution Levy (SSCL) into a single tax, reducing administrative complexity. Under the current system, banks and financial institutions are subject to 18 percent VAT along with a 2.5 percent SSCL, bringing the combined rate to 20.5 percent.
From July 1, these two components will be consolidated into a single VAT rate of 20.5 percent for the financial sector, while SSCL will no longer be charged separately.
Jayaweera emphasized that this does not constitute a new tax increase but rather a restructuring aimed at streamlining compliance. He noted that banks and financial institutions currently submit separate reports for VAT and SSCL, a process that will be simplified under the new system.
He further stated that the move aligns with the Government’s policy to modernize and simplify taxation, adding that the change also responds to requests from financial institutions to consolidate the two levies.
The proposed amendments were included in a Bill to revise the VAT Act, published on April 29, 2026. The changes will come into effect following the completion of the required constitutional process in Parliament.