Sri Lanka tourism VAT hike to 7-pct enables input credit claims

ECONOMYNEXT – Sri Lanka’s finance ministry has changed the value added tax (VAT) law for tourism industries, raising the rate to seven percent from five percent to enable companies to claim input credit from 1 June 2019.

A ministry gazette notice gives effect to the change which resolves an anomaly that arose when VAT was reduced to five percent from 15 percent under measures to revive tourism after April’s suicide bombings killed over 250 people, including tourists.

“Consequent to this revision, those supplies liable at the rate of seven percent will be entitled to claim input VAT attributable to the supply,” accountancy firm Ernst & Young told clients.

Earlier, the output VAT reduction meant restrictions under the existing VAT law on input credit claims on supplies and imports which had raised concern in the tourist industry.

The VAT law amendment covers VAT charged on services provided by hotels, restaurants, guest house, restaurant or other similar establishments providing similar services and is effective from 1 June to 31 March 2020.
(COLOMBO, 10 June 2019)

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