The Sri Lankan government has enacted the Value Added Tax (Amendment) Act, No. 04 of 2025, introducing significant tax exemptions aimed at reducing costs in energy production and promoting local agriculture.

Effective April 11, 2025, the Act exempts from VAT the supply or import of chemical naphtha by the Ceylon Petroleum Corporation (CPC) to the Ceylon Electricity Board (CEB) for electricity generation. This measure is intended to lower operational expenses in the energy sector and stabilize electricity tariffs.

Additionally, the Act provides VAT exemptions for liquid milk and yoghurt products that contain at least 50% locally produced fresh milk. This initiative supports domestic dairy farmers and encourages the consumption of locally sourced dairy products.

The legislation was passed in Parliament without a division and received the Speaker’s endorsement on April 11, 2025, thereby becoming law.