President Anura Kumara Dissanayake announced lower import levies on sprats, Maldive fish and dried chillies, and a VAT exemption for school books, in the 2027 Budget presented in Parliament on Thursday.

The Special Commodity Levy (SCL) on imported sprats will fall from Rs. 100 to Rs. 10 per kilogram, and the levy on Maldive fish from Rs. 302 to Rs. 10 per kilogram. The SCL on powdered and unpowdered dried chillies will drop by Rs. 50 per kilogram. All three changes take effect on 13 November 2026, according to the Budget proposals.

The government said the cuts are meant to ease the cost-of-living burden on consumers. The SCL on imported sugar will move the other way, rising by Rs. 10 per kilogram to narrow the tax gap between local and imported sugar and protect the domestic sugar industry.

Under proposed amendments to the Value Added Tax (VAT) Act, No. 14 of 2002, exercise books, textbooks, dictionaries, encyclopaedias, children’s picture and colouring books, printed music and single-sheet printed material will be exempt from VAT on import and supply. The President said the aim is to widen access to education and reading.

The VAT changes are due to take effect on 1 April 2027 and are estimated to reduce government revenue by Rs. 2.975 billion. Other proposals include a 25 percent cut in CESS rates on 800 selected Harmonized System (HS) code lines, the abolition of the Tourism Development Levy from 1 April 2027, and the removal of the Ports and Airports Development Levy (PAL) on imported newsprint and solar energy storage batteries from 1 January 2027.

Background

The SCL is a charge levied per kilogram on selected imported goods, and governments in Sri Lanka have adjusted it from time to time to influence the price of food staples. Sprats and Maldive fish are widely used dried fish products in Sri Lankan households.

Printed books became subject to VAT in January 2024, according to the Budget coverage. Exercise books had been subject to VAT before that date.

The Budget also proposes other VAT changes. VAT on cinema tickets will be calculated on each party’s share of ticket revenue, rather than the full ticket value, covering film producers, distributors, the National Film Corporation and cinema hall operators. The exemptions on Artemia eggs and coconut coir pith will be removed. Electronic tax invoices will have the same legal validity as paper invoices, and the Central Bank of Sri Lanka’s indicative exchange rate will be used to calculate VAT on foreign currency transactions.

What it means

The levy cuts on sprats, Maldive fish and dried chillies apply from Friday, so importers will clear new consignments at the lower rates. Whether and how quickly that reaches retail prices will depend on the market, since the cuts apply to imports and not to shelf prices.

Households and students could pay less for exercise books and textbooks once the VAT exemption starts in April 2027. The higher sugar levy, by contrast, increases the cost of importing sugar by Rs. 10 for every kilogram.