Sri Lanka’s State Revenue Soars by 25% in January After VAT Hike

In January 2024, state revenue in Sri Lanka saw a significant increase of 25 percent following the Value-Added Tax (VAT) hike, reaching Rs. 274 billion compared to the projected Rs. 219 billion, announced State Minister of Finance Ranjith Siyambalapitiya. This surge is attributed to notable performances across various departments; the Customs Department surpassed its Rs. 114 billion target by 11 percent, recording Rs. 121 billion, while the Excise Department exceeded its Rs. 12 billion target with a Rs. 14 billion revenue. Additionally, the Inland Revenue Department outperformed its target by an impressive margin, achieving Rs. 114 billion against the anticipated Rs. 88.9 billion.

During a parliamentary debate on government policy, Minister Siyambalapitiya highlighted that despite concerns over potential price hikes due to the VAT increase, inflation in January was maintained at 6.4 percent, with food inflation notably lower at 3.3 percent. This was largely due to the exemption of essential commodities from VAT, resulting in controlled food inflation, whereas non-food inflation was recorded at 7.9 percent.

The minister emphasized the broader benefits of this revenue increase, asserting that it will ultimately serve the interests of the country’s populace, indicating a positive outlook for economic stability and growth.