President Ranil Wickremesinghe has assured that while the IT sector of Sri Lanka will now be levied a Value-Added Tax (VAT) of up to 18%, the increased tax will not be a burden on the industry.
Addressing the Parliament today (Dec 12) during the debate on the 2024 Budget, the President said the proposed VAT will not burden the IT industry as it is an export-oriented industry.
Pointing out that the export of IT services is a 0-rated supply, the President also said that IT services provided to persons outside of Sri Lanka, for which payments are received in foreign currency, are exempt from income tax.
He emphasized that the decision to increase VAT must apply to all sectors, with no exceptions.
“Certain parties within the sector remain unsatisfied with the increased tax rates. Even in India, the GST rate for all kinds of IT software supply services and products is 18%,” he said.
“Whatever we have collected out of by increasing to 18% will come back to the sector, because there is Rs. 1.5 billion kept aside for research, just on AI, and another Rs. 8 billion for all other technological research, of which I’m sure this sector should take anything from Rs. 1 billion – Rs. 2 billion, so about Rs. 3.5 billion. What we’re doing is shifting the emphasis to research and helping research.
“Wherever they want to go ahead, the government is prepared to support them, and we are moving very fast towards the digitalization, and we will be looking in the next two-three years to do that, we’ll go piggybacking on India and then let us develop it, so the whole digital sector will expand. You might pay 18% VAT but you’re going to expand here in Sri Lanka and that’s the development”, the President further explained. (NewsWire)
Many in the #IT service have said they can go ahead – provided certain assistance is given to them. Some of the others have complained. But, they've always been complaining. However, IT services provided to persons outside of #SriLanka, for which payments are received in foreign… pic.twitter.com/aUzbPFcPke
— Manthri.LK_Watch (@ManthriLK_Watch) December 12, 2023