The Supreme Court of Sri Lanka has announced it will not proceed with the hearing on the petitions filed challenging the constitutionality of the Value Added Tax (Amendment) Bill, as the petitioners have opted not to proceed with the case.
One petitioner had withdrawn their petition prior to the hearing, while the second petitioner had opted to withdraw the petition after the court was informed that the Amendments proposed are to be moved at the Committee Stage of the Bill.
The petitioner, the Regional Lead of Uber Lanka (Pvt) Limited, had raised concerns over reference to Clause 2 of the Bill that it intended to Amend the Value Added Tax Act, No. 74 of 2025 so as “…to impose a tax liability on the supply of services by a non-resident person by an electronic platform” in Sri Lanka.
Furthermore, concerning Clause 2(a), the Petitioner argued that there is a glaring ambiguity as to what would constitute ‘supply of services through an electronic platform’. It was further argued that, when it comes to operators such as Uber, it was unclear as to whether tax would be calculated on all of the funds that flow through an electronic platform, most of which are passed on to local service providers, who pay VAT on such amounts so passed on. This, she argued, could result in discriminatory tax burdens between local service providers and non-resident service providers, or even between local offline service providers as against local service providers who use a digital platform. With respect to the abolition of the simplified VAT scheme envisaged in Clause 2(b) of the Bill, the Petitioner argued that it could disproportionately impact small and medium enterprises (SMEs) compared to larger corporations.
On such grounds, the Petition contended certain provisions of the Bill to be inconsistent with Articles 3,4,12, 13(3) and 14(1)(g) of the constitution.
Responding to the matter, the Deputy Solicitor General presented a letter dated 17th March 2025 by the Secretary to the Treasury providing clarifications to certain concerns raised by the Petitioner as well as the Amendments proposed to be moved at the Committee Stage of the Bill.
Per the clarifications by the Treasury Secretary, (a) the value of supply of goods or services for VAT purposes is determined in accordance with the provisions of Section 5 of the VAT Act. It will depend on the nature of the services supplied and will have to be decided on a case-by-case basis. (b) The date of effectiveness of the VAT Amendment Act will be phased out to October 07, 2025, from April 01, 2025, to enable better compliance by suppliers providing services through an electronic platform. (c) Relevant regulations relating to the payment of VAT on supplies made through electronic platforms by non-resident persons could be promulgated only after the enactment of the Amendment Act. Accordingly, actions will be taken to promulgate the regulations after the enactment of the law, but at least 03 months before the date of effectiveness of the tax.
The court was further informed by the Deputy Solicitor General that persons similarly placed will be treated similarly, irrespective of whether they are resident or non-resident, in the application of Section 5 of the Value Added Tax Act, as proposed to be amended by the Bill.
In view of these clarifications and amendments proposed to be moved at the Committee Stage of the Bill, the Petitioner announced that she would not be proceeding further in this matter.
As both Petitioners opted not to proceed with their Petitions, the Supreme Court announced it will make no determination as to the constitutionality of the Value Added Tax (Amendment) Bill.
The Supreme Court has conveyed the details of the matter to the Parliament, the Speaker of the Parliament and the President for their information and necessary action. (Newswire)