## ICC Sri Lanka Raises Concerns on New VAT Invoicing 📈

The International Chamber of Commerce Sri Lanka (ICCSL) recently convened a seminar to address implementation challenges regarding the new VAT Tax Invoice format, scheduled to take effect from 1 April 2026. • The Structural Shift The reform is viewed as a significant change in how businesses document transactions and claim input tax credits. It aims for greater traceability, alignment with digital compliance, and the prevention of fictitious invoicing. • Practical Implementation Risks Business leaders and tax professionals from KPMG and Ernst & Young identified several critical hurdles: System & Software Readiness: High costs for upgrading IT infrastructure to meet new mandatory fields. SME Burden: A disproportionate compliance weight on small and medium enterprises. Compliance Risks: Potential for invoice rejection and denial of input tax credits due to minor technical errors or "timing mismatches." • Key Recommendations Transition Period: A call for adequate lead time to train staff and adjust systems before strict enforcement. Clarity & Certainty: The IRD is urged to resolve ambiguities and finalize the format before businesses incur significant system development costs. Guidance Over Penalty: A balanced approach prioritizing education and practical guidance notes over immediate punitive measures for genuine errors. The ICCSL will submit formal proposals to the Inland Revenue Department to ensure these reforms support economic stability and the ease of doing business rather than creating unintended friction.