• VAT on CPC naphtha to CEB exempted but imposed on cross-border digital services via e-platforms    
• Filing VAT returns only electronically, manual submissions only per IRD CG’s ‘exceptional’ approval 

The Inland Revenue Department (IRD) announced that locally produced liquid milk and yogurt are now exempted from Value Added Tax (VAT), following the enactment of the VAT (Amendment) Bill.

In a statement issued this week, the department clarified that the VAT exemption came into effect on 11 April, the day that the said Bill received Parliamentary assent from the Speaker Dr. Jagath Wickramaratne. The Bill was passed in the Parliament on 9 April. To qualify for the exemption, liquid milk products must contain at least 50% fresh milk, the department emphasised.

In addition to dairy products, VAT has also been removed on naphtha supplied by the Ceylon Petroleum Corporation (CPC) to the Ceylon Electricity Board (CEB) for electricity generation.

Meanwhile, the amendment introduces new tax-related obligations for the digital economy. From 1 October, VAT will be imposed on digital services provided by non-resident entities to consumers in Sri Lanka through electronic platforms. This move aligns with global trends in taxing cross-border digital services.

Additionally, the VAT exemption on the import of aircraft engines or aircraft spare parts, identified under specified harmonised commodity description and coding system numbers for Custom purposes has been lifted with effect from 11 April.

Further, the department announced that all individuals and entities engaged in the commercial import or export of goods are now required to register under the updated VAT framework.

Elsewhere, the IRD said that all VAT returns must be filed electronically from 1 July. The manually filed return submissions will only be allowed under exceptional circumstances approved by the Commissioner General (CG) of the IRD.