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Sri Lanka: Importation and supply of fabric subject to 18% VAT rate

Transitional provisions for fabric imported before April 1, 2026.

april 16, 2026

The Department of Inland Revenue on April 8, 2026, issued a notice (PN/VAT/2026-04/1) announcing that effective April 1, 2026, the importation and supply of fabric are subject to value added tax (VAT) at the rate of 18%.

A transitional provision allows that the supply of fabric that had been imported and was subject to a CESS levy at the point of importation prior to April 1, 2026, will be exempt from VAT. Proper and separate records and documentation must be maintained for such transactions.

Read an April 2026 report prepared by the KPMG member firm in Sri Lanka

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