The rate
The standard rate in Sri Lanka is 18%. Some goods and services carry reduced or zero rates and others are exempt. The difference matters: zero-rated sales still let you reclaim the tax on your purchases, exempt sales do not.
18% is the standard rate. Financial services have been taxed separately at 20.5% since 1 July 2026.
Who must register
Register if taxable supplies exceed Rs. 15 million in any quarter, or Rs. 60 million in the twelve months then ending, or if there are reasonable grounds to believe either will be exceeded in the next period. Those figures have applied since 1 January 2024 and did not change in 2026 — a cut proposed in Budget 2026 was abandoned. Financial services have their own lower thresholds of Rs. 3 million a quarter and Rs. 12 million a year. Anyone importing or exporting goods for commercial purposes must register regardless of turnover. Voluntary registration is available under section 12 to any person carrying on a taxable activity. Non-residents supplying services into Sri Lanka through an electronic platform have had to register under section 25L since 1 July 2026 on the same Rs. 60 million / Rs. 15 million tests; they do not charge VAT where the customer is itself VAT-registered.
How to register
Registration for VAT is an application to the Commissioner-General in the specified form, due no later than fifteen days after the date the business becomes liable to register (VAT Act, section 10(2)). A TIN must exist first, and the VAT registration is then added as a tax type through the IRD e-Services portal. Any change to the taxpayer's details has to be made before applying.
For permanent VAT registration IRD asks for proof of taxable supplies, such as sales invoices, purchase orders, sales agreements, bank statements or a rent agreement, a registration certificate from the sector body where one applies (for example the Tea Board or the Coconut Cultivation Board), a statement of the purpose for voluntary registration, and a copy of the NIC of the person collecting the VAT certificate. No supporting documents are needed for tax types other than VAT.
Importers and exporters who have no permanent registration can obtain temporary VAT through e-Services, supported by a bill of lading or airway bill for imports and a purchase order or agreement for exports. Questions go to the IRD call centre on 1944.
Filing and paying
Registered and filed with Inland Revenue Department (IRD).
The default taxable period is the calendar quarter. Eligible exporters and approved projects file monthly, and anyone else can be put on monthly or quarterly by the Commissioner-General. The return is due on the last day of the month after the period ends, and since the taxable period beginning 1 July 2025 it must be filed electronically on e-Services — paper needs prior approval. Payment is monthly regardless of return frequency: the VAT for each month is due by the 20th of the following month. Invoice-level schedules go in through RAMIS, either typed into e-Service, uploaded as CSV, or pushed from your ERP over the Web API, and you can start capturing them from day one of the period.
Penalties for getting it wrong
Tax in default attracts a penalty of 10% of the amount in default, plus a further 2% for each month or part month it stays unpaid, capped at 100% of the tax in default. The Commissioner-General can waive or reduce it for special circumstances. An incorrect return can cost up to Rs. 25,000 plus twice the difference between the tax assessed and the tax you returned. Failing to file a return, failing to issue a tax invoice when required, issuing more than one for the same supply, or issuing one when you are not registered are offences carrying a fine up to Rs. 25,000, up to six months' imprisonment, or both.