### Sajith Premadasa Warns New VAT Reforms May 'Suffocate' Businesses 📈

The Opposition Leader has criticized the proposed Value Added Tax (VAT) Amendment Bill, scheduled to take effect from July 1, 2026, labeling the aggressive tax expansion as "extraction" rather than reform. • Key Threshold Changes: The annual VAT registration threshold will be slashed from Rs. 60 million to Rs. 36 million. This move is expected to significantly increase the compliance burden on SMEs, dragging smaller players into the tax net. • Sector Impact: Financial Services: Tax rate to increase from 18% to 20.5%, directly impacting banks and financial institutions. Digital Economy: Non-resident companies providing digital services to Sri Lankan consumers will be brought under the VAT net for the first time. Strategic Projects: Tax concessions will continue for certain businesses within the Colombo Port City. • Enforcement & Compliance: Businesses must adopt IRD-approved POS systems for real-time reporting. Non-compliance could lead to fines up to Rs. 1 million or imprisonment for up to six months. • Economic Outlook: Premadasa argues that the simultaneous widening of the tax base, rate hikes, and tighter enforcement will stifle growth, questioning the sustainability of the private sector under such "unsustainable pressure."