Sri Lanka is estimated to have lost Rs. 461.49 billion in tax revenue through concessions and exemptions granted on four categories of indirect taxes during the first six months of 2026, according to a report issued by the Ministry of Finance, Planning and Economic Development.
The estimated revenue loss covers Value Added Tax (VAT), the Social Security Contribution Levy (SSCL), Excise Duty (Special Provisions) and Customs Import Duty. VAT concessions accounted for the largest share, with an estimated Rs. 242.95 billion in revenue foregone between January and June, the report stated.
Concessions granted on the SSCL resulted in a further estimated revenue loss of Rs. 135.27 billion during the same period. Customs Import Duty exemptions accounted for Rs. 74.25 billion, while concessions on Excise Duty (Special Provisions) were estimated to have reduced government revenue by Rs. 9.02 billion.
The report also identified a substantial increase in revenue foregone through corporate and personal income tax concessions over the two most recent assessment years. Estimated losses from corporate income tax concessions rose from Rs. 119.29 billion in the 2023/24 assessment year to Rs. 186.07 billion in 2024/25.
The estimated revenue loss from personal income tax concessions increased more sharply, rising from Rs. 10.46 billion in 2023/24 to Rs. 36.28 billion in 2024/25. The report puts the increase at 246.8 per cent.
The Ministry’s figures also show that exemptions granted to domestically assembled vehicles accounted for almost all the revenue foregone under Excise Duty (Special Provisions) during the first half of 2026. These exemptions resulted in an estimated loss of Rs. 9,005 million, equivalent to 99.8 per cent of the total revenue loss recorded under that tax category.
Under Customs Import Duty, 89.8 per cent of the estimated revenue loss during the six-month period was attributed to concessions granted under Section 19(A) of the Customs Ordinance. These concessions covered general purposes and special projects, according to the report.
The Ministry said the tax concessions and exemptions had been granted to serve various policy objectives, including investment promotion, export development, economic growth and social protection.
However, it also highlighted the need for continuous assessment of the fiscal implications and policy benefits of these measures. Tax concessions and exemptions reduce or defer revenue that the government would otherwise collect, making it important to evaluate their impact alongside the policy objectives they are intended to achieve.
