Finance Ministry to introduce GST, increase VAT

The Finance Ministry is to reintroduce Goods and Services tax and increase VAT by 3 per cent to 18 per cent from 15 per cent at present in a valiant attempt to boost the tax revenue.

The Cabinet Memorandum on the new tax revision will be presented to the cabinet shortly for approval, Finance Ministry sources said. The VAT increase was announced in budget 2022 while the GST is a general one which is being announced for the first time.

Ad hoc tax policy changes and weak administration of the Inland Revenue Department (IRD) have significantly eroded the tax base resulting in a sharp decline in tax collection, an official revenue collection report revealed.

However the IRD says it can achieve Rs. 907 billion in tax revenue this year amidst the present challenges.

An additional sum of Rs. 254 billion is expected to be collected as tax revenue this year as a result of introducing three new tax revisions introduced by the Ministry, a senior IRD official said.

The IRD has been able to collect Rs. 489.1 million of its Rs. 575.5 billion revenue target for 2021, he disclosed. (Bandula)