Official Hansard & Gazette Backed

Sri Lanka Tax System: Who Pays What?

Understanding Value Added Tax (VAT), Personal Income Tax (PAYE), Corporate Income Tax (CIT), Social Security Contribution Levy (SSCL) and exemptions.

Data Explanation & Citizen Context

Where Does Government Revenue Come From?

In Sri Lanka, approximately 82% of all government tax revenue comes from INDIRECT taxes (VAT, Customs, Excise, SSCL) that every citizen pays regardless of income when buying essential goods, fuel, or services. Only about 18% comes from DIRECT taxes (Corporate tax and Personal Income Tax/PAYE).

INDIRECT45%

Consumers (Everyday Goods & Services)

Paid via 18% VAT and 2.5% SSCL on groceries, dining, phone bills, clothing.

INDIRECT18%

Vehicle & Fuel Users

Excise duty on petrol, diesel, auto spare parts, and vehicle licensing.

INDIRECT14%

Importers & Cross-border Traders

Customs import duties, CESS, PAL levies collected at ports.

DIRECT14%

Corporate Businesses & Banks

30% Corporate tax on profits, financial services VAT.

DIRECT9%

Salaried Professionals & High Earners

Monthly APIT/PAYE deductions and individual wealth tax filings.

VAT

Value Added Tax (VAT)

එකතු කළ අගය මත බද්ද (VAT) • பெறுமதி சேர்க்கப்பட்ட வரி (VAT)

Effective Rate

18.0%

Current Rate

Share of Tax Revenue

38.5% of Total Tax

Of Total Collections

Government Revenue (2025)

Rs. 1450 B

Annual Collected

Historical Rate Revisions

200210% & 20%Replaced GST with two-tier VAT.

UNF Government

200515%Standardized VAT rate.

Mahinda Rajapaksa I

201112%Rate reduction to stimulate domestic trade.

Mahinda Rajapaksa II

201615%Increased under 2016 IMF EFF program.

Yahapalana Government

20198%Sweeping pre-election tax cuts.

Gotabaya Rajapaksa

202212% → 15%Emergency stabilization post-default.

Interim Emergency Budget

202418%Hike with removal of fuel/power exemptions.

Wickremesinghe Administration