The Government’s decision to reduce the Value Added Tax (VAT) registration threshold from Rs. 60 million to Rs. 36 million in annual turnover from April will not lead to an increase in the prices of goods, Cabinet Spokesperson Dr. Nalinda Jayatissa said.

Speaking at the weekly Cabinet media briefing yesterday (24), Dr. Jayatissa said the move is aimed at improving tax compliance and capturing unregistered entities operating within the Rs. 36 million to Rs. 60 million turnover range.

“They have been collecting VAT but not remitting it to the Government. They will now be required to pay that amount,” he said.

He explained that entities not registered for VAT are currently unable to claim input tax, and that the revision would enable them to do so.

“This will not lead to any increase in taxes. What it does is recover the portion of VAT that was collected but not paid to the Government, while allowing those who could not previously claim VAT to do so,” he said.

Dr. Jayatissa stressed that the measure is intended to strengthen tax collection and compliance, rather than impose additional tax burdens.

He added that improved invoicing practices and the expansion of the VAT network would make the system more efficient over time.

“With higher tax revenue, the Government will be in a better position to provide relief. This will not result in higher taxes or create difficulties for private traders,” he said.