18% VAT for fuel, LPG but no PAL from January

The Ports and Airports Development Levy (PAL) currently imposed on fuel and gas is set to be removed upon implementation of the revised Value Added Tax (VAT).

Accordingly, the 7.5% PAL on fuel and the 2.5% PAL imposed on Liquefied Petroleum (LP) gas will be lifted when the increased 18% VAT comes into effect on 1 January 2024, Advisor on Tax Policy to the Ministry of Finance Thanuja Perera explained.

The VAT (Amendment) Bill was passed in the parliament on 11 December by a majority of 45 votes, with 100 MPs voting in favour, and 55 voting against it. The Bill subsequently came into effect as the VAT (Amendment) Act No.32 of 2023. Accordingly, a hike in VAT up to 18% from the current 15% had been green-lighted.