Government Reverses Course on VAT and SSCL Threshold Reduction, Keeps Limit at Current Level

The government has decided against implementing a proposed reduction to the annual turnover threshold for Value Added Tax (VAT) and the Social Security Contribution Levy (SSCL), Deputy Minister of Economic Development Nishantha Jayaweera has confirmed.

The original budget proposal had sought to lower the threshold from its current level down to Rs. 36 million with effect from July 1, a move that would have brought a significantly larger number of businesses into the tax net. However, the government has now stepped back from that plan.

What the Proposal Would Have Meant for Businesses

Had the threshold reduction gone ahead, businesses with an annual turnover of Rs. 36 million or more would have been required to register for VAT and SSCL compliance. This would have expanded the tax base considerably, placing additional obligations on smaller enterprises that were previously below the registration threshold.

Many business chambers and trade associations had raised concerns about the potential burden on small and medium-sized enterprises, particularly at a time when Sri Lanka's economy is still navigating a fragile recovery following the 2022 economic crisis.

Government Responds to Concerns

Deputy Minister Jayaweera's announcement signals that the government has taken those concerns into account. By maintaining the existing threshold, authorities are opting to shield smaller businesses from increased compliance costs, at least for the time being.

The decision is likely to come as a relief to the small business community, which had been bracing for the administrative and financial implications of the proposed change ahead of the July 1 deadline.

No revised timeline or alternative threshold figure has been announced at this stage, and it remains to be seen whether the government will revisit the proposal in future fiscal planning cycles.

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