Cabinet approves increase in Value Added Tax (VAT) to 18%

In a decision that is set to have a significant impact on the country's fiscal policy, the Sri Lankan Cabinet has granted approval for an increase in the Value Added Tax (VAT) rate, with the new rate coming into effect from January 01, 2024.

The decision to raise the VAT rate from its current level to 18% is part of the government's fiscal reforms aimed at stabilizing the nation's economy. 

The Value Added Tax is a consumption tax imposed on the value added to goods and services at each stage of production or distribution. The rate hike is anticipated to have an impact on the prices of various goods and services, which will be adjusted to accommodate the higher tax rate.

This move follows a series of economic measures and reforms taken by the government to address fiscal constraints and stimulate economic recovery. 

The decision to increase the VAT rate to 18% has been met with mixed reactions from the public, with concerns raised about the potential impact on the cost of living and the overall economy.