LNP – VAT exempted on locally produced milk and yogurt; digital services and traders face new tax changes

The Inland Revenue Department (IRD) announced that locally produced liquid milk and yogurt are now exempted from Value Added Tax (VAT), following the enactment of the Value Added Tax (Amendment) Bill.

In a statement issued this week, the department clarified that the VAT exemption came into effect on April 11, the day the bill received parliamentary assent from Speaker Dr. Jagath Wickramaratne. The bill was passed in Parliament on April 9.

To qualify for the exemption, liquid milk products must contain at least 50 percent fresh milk, the department emphasized.

In addition to dairy products, VAT has also been removed on naphtha supplied by the Ceylon Petroleum Corporation (CPC) to the Ceylon Electricity Board (CEB) for electricity generation.

Meanwhile, the amendment introduces new tax obligations for the digital economy. From October 1, VAT will be imposed on digital services provided by non-resident entities to consumers in Sri Lanka through electronic platforms. This move aligns with global trends in taxing cross-border digital services.

Further, the department announced that all individuals and entities engaged in the commercial import or export of goods are now required to register under the updated VAT framework.