The Cabinet of Ministers, on Monday (June 05), gave its approval for a resolution pertaining to the Value-Added Tax (VAT) and the Simplified Value-Added Tax (SVAT).
The resolution was put forward by President Wickremesinghe, in his capacity as the Minister of Finance, Economic Stabilization and National Policies.
Accordingly, the government will remove most of the releases from the VAT, further retaining releases that ease the pressure on low-income families in order to secure the fundamental sectors of the economy as well as the releases for sectors such as education, health and agriculture.
The resolution also seeks to revise the provisions applicable to the VAT Act so that the SVAT methodology can be cancelled with effect from January 01, 2024, by introducing a more formal methodology for repaying the VAT.
Further, the Cabinet also approved a proposal to instruct the Legal Draftsman to prepare a draft Bill for the purpose.
The Government Information Department says two major reformations with regard to the VAT should be introduced pursuant to the comprehensive funding facility of the International Monetary Fund (IMF). Thereby, removing most of the releases, the reformation of the VAT scheme and cancellation of the SVAT methodology should be applied.
Approximately 1.2% of the gross domestic product (GDP) from the tax income can be increased by reactivating the logic of the existing release of VAT, the Government Information Department explained.