The Deputy Minister of Economic Development, Nishantha Jayaweera has clarified reports surrounding the gazette notification issued to revise Value Added Tax (VAT) with effect from 1 July.

Issuing a statement, Deputy Minister Jayaweera said the move is aimed at simplifying the tax system in line with government policy, by merging VAT and the Social Security Contribution Levy (SSCL) into a single tax.

He explained that banks and financial institutions, which were previously subject to 18% VAT and a 2.5% Social Security Contribution Levy, will instead pay a consolidated 20.5% VAT from 1 July. However, he stressed that the Social Security tax will no longer be charged separately.

Deputy Minister Jayaweera noted that claims circulating, particularly on social media, that VAT is being increased to 20.5% are misleading, as the change reflects a restructuring rather than a new tax hike.

He added that the revision would also reduce administrative requirements, as financial institutions will no longer need to submit separate filings for the two taxes.