Lowering VAT Threshold Threatens Survival of Sri Lanka’s Micro and Small Businesses

The reduction of Sri Lanka’s VAT threshold from Rs. 60 million to Rs. 36 million will negatively impact MSMEs and low-income groups, increasing their tax burden and consumer prices.
The move is expected to push many small retailers into the tax net, potentially causing consumers to shift to non-VAT businesses and creating economic imbalance.
MSMEs are vital to Sri Lanka’s economy, contributing 52% to GDP and employing 4.5 million people, but many have already closed or are struggling due to recent crises.
Access to finance remains a major issue for MSMEs, with over 60% listed as having non-performing loans, and government measures have not adequately addressed their challenges.
Many MSMEs face liquidation, with a growing number of cases leading to a dedicated commercial high court for liquidations.

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.