Budget 2027: tax relief, public investment and benefits remain subject to delivery

Sri Lanka’s 2027 budget combines selected household tax relief, proposed changes to public-sector allowances and large investment plans. The November 12 speech and published accounts set out intentions across transport, energy, housing, health, education and digital services. A budget announcement is not proof that a household can claim every benefit immediately or that a project has been completed.

For income tax, the reported proposal raises the monthly tax-free threshold from Rs 150,000 to Rs 162,500 and changes the bands. Food measures distinguish cuts on sprats, Maldive fish and dried chillies from a separate increase in the sugar levy. Proposed VAT relief for printed books and exercise books is another targeted measure, not the abolition of every consumption tax. Product classifications and effective legal instruments remain important.

Trade proposals include staged CESS reductions, removal of specified import levies on newsprint and solar-storage batteries, and a proposed end to the Tourism Development Levy from April 2027. These have different start dates and scopes. Concessionary business, women-led household, homestay and migrant-worker loan schemes have their own proposed limits; an allocation does not establish an individual loan approval.

Public-sector measures include staged health-service allowance rises, police and prison allowances, university and training payments and funding for recruitment. The speech also proposes school broadband support, teacher-training allowances and digital-enterprise financing. Exact eligibility, payroll dates and application rules require the relevant implementing notices, not assumptions drawn from a speech headline.

Infrastructure plans span roads, rail electrification, buses, airport capacity, fuel pipelines and storage, the electricity grid, solar batteries, water and irrigation. Housing and resettlement plans include larger per-house assistance and a two-year ambition to complete the resettlement of remaining conflict-displaced families. Study and planning allocations must be distinguished from full construction funding, signed contracts and delivered homes.

Social-protection proposals include support for disability and kidney-patient allowances, vulnerable children and selected student groups. Health plans include ambulances, mosquito control and changes to hospital administration; environmental proposals include wildlife treatment, disaster equipment, early warning and waste collection. These are programmes with separate budgets and delivery responsibilities, not one universal cash entitlement.

Fiscal estimates with the supplementary reconstruction provision are set out below separately from completed spending. Parliamentary scrutiny and the final legal schedules remain important.

The next scheduled votes are November 20 and December 14. Readers seeking a particular tax or benefit should distinguish a proposal, an enacted instrument and actual implementation. The calculator photograph illustrates budget planning; it is not a Sri Lankan government document or evidence that a proposal has been implemented.

November 13 update: Rs131 billion health capital plan

The 2027 Budget provides Rs131 billion in capital expenditure for maintaining and developing public health services, according to published accounts of the November 12 speech. This is a capital-spending figure for services under central and provincial administration, not a statement of the entire health budget or proof that the money has already been spent.

The proposals include 1,000 Arogya Wellness Centres between 2027 and 2029, with a reported total investment of Rs17.44 billion and Rs3.6 billion for 2027. The published report says a 39-centre pilot is already being implemented. These different figures describe the multi-year plan, its next-year allocation and the pilot; they are not three additional programmes to add together.

For equipment such as MRI and CT scanners and Cath Lab facilities, Published reporting indicates Rs15.5 billion already allocated for 2027 and a further Rs5 billion proposed. A separate Rs3 billion is proposed to replace ageing ambulances. Partner-backed ambulance plans include 25 through an Asian Development Bank loan, 20 through a Japanese grant coordinated with the ADB, and 100 for 1990 Suwa Seriya through Indian assistance. These are financing and procurement plans, not confirmation that all vehicles or scanners have reached hospitals.

Other reported measures include Rs300 million for an accident and emergency unit at Thambuttegama Base Hospital, Rs1.245 billion to begin identified hospital development projects, and Rs510 million for feasibility studies and preliminary planning. The planning allocation must not be described as completed construction. Proposed administrative transfers of six district general hospitals and a robotic-surgery training centre likewise require implementation steps. No hospital-level delivery date, individual entitlement or waiting-time improvement is established by these announcements.

November 13 detailed Budget update

The following tax dates, investment measures and loan terms are Budget proposals or dated programme descriptions. A proposed effective date does not by itself establish that implementing legislation, eligibility rules or application systems are already in force.

2027 fiscal targets and policy priorities

The Budget's broad objectives are to reduce poverty, build a fair society, remove bribery and corruption, speed up economic development, restore public trust and improve quality of life. Its seven strategic priorities are macroeconomic stability and resilience; investment-, production- and export-led growth; productivity through technology, innovation and human capital; an inclusive rural economy; stable energy markets; climate-disaster resilience; and modern government administration.

The 2027 estimates, including the supplementary estimate for Ditwah reconstruction, put government service expenditure at Rs4,992 billion, capital expenditure at Rs2,000 billion and tax revenue at Rs5,687 billion, or 14.6% of GDP. The estimated deficit is 4.5% of GDP and primary surplus 2.3%. The accompanying economic indicators describe foreign reserves above US$7 billion as of October 2026 and a credit-rating move from CCC+ to B-. These dated indicators and budget estimates are not completed expenditure or a forecast guaranteed to occur.

Tax revenue composition: 2026 and 2027

Amounts are in rupees billion. Total tax revenue: 5,478 in 2026 versus 5,687 in the 2027 Budget, each 100%. Income tax: 1,311 (23.9%) versus 1,341 (23.6%). Taxes on goods and services: 3,454 (63.1%) versus 3,592 (63.2%). Taxes on external trade: 713 (13%) versus 754 (13.3%). The 2027 figures include the supplementary estimate. The approximate direct-to-indirect ratio is 24:76 in both years. Total tax revenue is estimated to rise by Rs209 billion, or 3.8%; income tax by 2.3%; goods-and-services taxes by 4%; and external-trade taxes by Rs41 billion, or 5.8%. Estimated revenue losses are Rs16 billion from income-tax revisions and Rs2.9 billion from VAT revisions.

Personal income tax: proposed April 1, 2027 changes

Annual personal relief is proposed to rise from Rs1.8 million to Rs1.95 million, an 8.3% increase. Its monthly equivalent rises from Rs150,000 to Rs162,500. The 12% marginal rate would return; the 18%, 24% and 30% bands each widen from Rs500,000 to Rs600,000. The top 36% rate is unchanged and, under the proposal, is reached at monthly income of about Rs433,333. The maximum illustrated annual saving from personal relief and the revised bands is Rs189,000 for annual individual income of Rs5.2 million or more. These are proposals, not an individual tax assessment.

Illustrative salary and tax comparison, rupees

The historical comparison separates relief from taxable-income bands. January 2020-December 2022: relief Rs3 million, 6% on the first Rs3 million, 12% on the next Rs3 million and 18% on the balance. January 2023-March 2025: relief Rs1.2 million, successive Rs500,000 bands at 6%, 12%, 18%, 24% and 30%, then 36% on the balance. From April 2025: relief Rs1.8 million, first Rs1 million at 6%, no 12% band, next Rs500,000 each at 18%, 24% and 30%, then 36%. The 2027 proposal: relief Rs1.95 million, first Rs850,000 at 6%, next Rs600,000 each at 12%, 18%, 24% and 30%, then 36% on the balance.

BOI capital allowances and the scope of capital gains tax

From April 1, 2027, a proposed option would allow BOI-approved export-manufacturing or tourism enterprises investing at least US$3 million to claim an enhanced allowance of 200% of qualifying capital expenditure. Manufacturing and tourism other than hotels must meet a three-year investment period; hotels have five years. Businesses choosing it cannot also claim the existing Fourth Schedule allowances or Second Schedule enhanced allowances. Unlike location-linked Second Schedule concessions, this proposal uses qualifying expenditure and the investment period without a location distinction. It is a tax allowance, not a cash grant equal to twice the investment.

Also proposed from April 1, 2027 is a wider capital-asset definition under section 195 of the Inland Revenue Act: digital and virtual assets including cryptocurrencies; commercially valuable rights and licences including telecommunications and broadcasting licences; and gems, jewellery, precious metals and other valuable movable assets above a prescribed monetary threshold. The proposed threshold is not specified in these highlights and should not be invented.

VAT and other domestic levies

Proposed VAT changes from April 1, 2027 include exemptions for specified books, exercise books and printed material, and removal of exemptions for Artemia eggs and coconut coir pith. Newly VAT-registered businesses could qualify as eligible exporters where exports exceed 80% of turnover in the preceding six months. Electronic tax invoices would be legally recognised subject to the Commissioner General of Inland Revenue's requirements. Cinema VAT would be calculated for producers, distributors, the National Film Corporation and cinema operators on each party's revenue share, using ticket value after Entertainment Tax but before VAT. Foreign-currency supplies would use the Central Bank's indicative exchange rate as prescribed by the Commissioner General.

The levy proposals also expressly exempt bunker fuel supplied to ships in international transport from the Social Security Contribution Levy. The Tourism Development Levy is proposed to end from April 1, 2027, with estimated annual revenue loss of Rs40 million. Amendments to the Betting and Gaming Levy Act No.40 of 1988 aim to simplify administration and compliance; the highlighted commencement is April 1, 2027.

Import levies: different dates and amounts

The special commodity levy changes are dated November 13, 2026: sprats and Maldive fish reduced to Rs10 per kg; powdered and unpowdered dried chillies reduced by Rs50 per kg; sugar increased by Rs10 per kg. The estimated annual revenue increase is Rs950 million. The proposed removal of the Ports and Airports Development Levy on imported newsprint and solar-energy-storage batteries is dated January 1, 2027, with estimated annual revenue loss of Rs350 million. A 25% CESS-rate reduction on 800 HS-code lines is proposed from April 1, 2027, with estimated annual revenue loss of Rs40 million. A reduction to Rs10 and a reduction by Rs50 are different measures.

Income-tax administration and information safeguards

Proposed Inland Revenue Act changes cover accountant or authorised-person certification of compliance with cash-transaction restrictions; anti-avoidance rules for amalgamations and mergers; protection against double taxation of inter-NGO donations where earlier tax payment is proved; source rules based on the place of payment for remote and digital services; and a Double Taxation Agreement definition aligned with OECD and UN model conventions. A clarification would limit the stated 14% withholding tax on service fees and insurance premiums to payments to non-residents without a Sri Lankan permanent establishment. Information from foreign tax authorities could be shared only with authorised persons and with those authorities' prior consent.

VAT administration and statutes

COVID-related late-return input credits previously disallowed could be claimed if outstanding returns were filed by July 31, 2026. Proposed input-credit claim periods are 12 months for local purchases and 24 months for imports, irrespective of return submission date. Sinhala-English discrepancies on input claims would be corrected. Debit and credit note timing would align with a 12-month input-claim period. Rules for Non-Foreign Exchange transactions, non-tax invoices, exemptions and related matters would be clarified. Further changes are proposed to the Tax Appeals Commission, Inland Revenue, VAT, Social Security Contribution, Betting and Gaming Levy, Ports and Airports Development Levy and Finance or Finance Amendment statutes.

Investment access and the legal framework

Investment proposals include an Investment Protection Bill on fair treatment, compensation and disputes; a Treasury-owned promotion company staffed by professionals with private-sector and international experience; a consultant for a National Single Window for Investment; an officials' committee already appointed to reduce delays releasing state land; and a Colombo Port City Economic Commission Amendment Bill offering further facilities to investors and employees.

The legal-framework account distinguishes measures already legislated from future bills. It lists the Rescue, Rehabilitation and Insolvency (Corporate and Personal) Act No.12 of 2026, Prevention of Money Laundering Amendment Act No.16, Financial Transactions Reporting Amendment Act No.17 and Convention on the Suppression of Terrorist Financing Amendment Act No.18 as legislated. The public-private partnership measure is described as gazetted and expected before Parliament in early 2027, not as completed parliamentary enactment. The State Owned Business Enterprises Management Bill is drafted and referred to the Attorney General for comments. Changes are expected to the Customs Ordinance, Finance Business Act, Financial Reporting Regulatory Act and Excise Special Provisions Act; a Public Asset Management Act is also proposed.

Trade, exports and market access

The Rs1.99 billion National Single Window for Trade has a pilot underway, with exporters proposed to connect in early 2027 and importers and re-exporters in late 2027. Customs would receive Rs1 billion for body and container scanners. A modernised TIEP scheme would assist tax-concession clearance of imports for export processing, inter-port trading and SME exports. Rs750 million is allocated for Sri Lanka Expo 2027 and the National Export Development Plan. Rs4 billion is allocated for new and existing industrial estates, including Valachchenai, Ingiriya, Dambulla, Raigama-Millaniya and Katunayake.

Officials would work on the India free-trade agreement and a new China agreement; Sri Lanka has applied to join RCEP. Comprehensive Economic Partnership Agreements with the UAE and Oman are expected, not completed deals in this account. The Sri Lanka-EU Sustainable Trade and Economic Integration Project is planned for 2027-2030 with an EU grant of Rs3.4 billion.

Capital markets and tourism

A Share for Everyone would provide a share portfolio worth up to Rs10,000 for Grade 13 students aged 18 or over. An SME Listing Support Mechanism would encourage listing on the Colombo Stock Exchange. Neither proposal should be described as an account already opened or shares already delivered to every student.

Tourism measures propose homestay loans up to Rs2 million at 3% and Rs500 million in concessionary loans for marine-tourism equipment. Plans include a Colombo cruise terminal and upgrades at Galle, Tangalle and Trincomalee ports; public-private restoration of Colombo Fort heritage buildings and Dutch forts in Jaffna, Mannar, Kalpitiya and Batticaloa; central e-ticketing for major attractions; stronger Tourist Police with a 24-hour hotline; hotel schools at Polonnaruwa and Pinnawala; and development of Sigiriya Domestic Airport.

SME finance and targeted loans

Rs67.6 billion for interest subsidies and refinancing is expected to support Rs174 billion of concessionary loans. Re-SME Plus is a refinancing and interest-subsidy scheme for micro, small and medium enterprises. Sector proposals include fisheries exporters and suppliers' loans up to Rs500 million at 5%; homestay start-up or upgrade loans up to Rs2 million at 3%; and an interest-free pledge-loan scheme for small and medium paddy mill owners. Rural enterprises employing at least five Aswesuma beneficiaries could receive up to Rs5 million at 4%; women-headed households could access group loans up to Rs1 million at 3%. Information is described as available through the newly introduced 1819 hotline. These limits do not establish that a particular borrower qualifies, that lending has already begun, or that every application will be approved.

November 13 update: seafood exporters set out a conditional growth target

The Seafood Exporters' Association of Sri Lanka says annual seafood export earnings could reach US$680 million by 2030 if investment, infrastructure and trade policies improve. This is the association's conditional industry target, not a forecast guaranteed by the Budget or export income already earned. Its response adds an industry view to the investment proposals above.

According to the association, seafood exports earned US$246.12 million in January-September 2026, including US$64 million from value-added products. It puts the value-added share at 26% for that period, compared with 4% in 2022. These are the association's reported figures; the nine-month earnings and its full-year 2030 ambition cover different periods.

Exporters welcomed the proposed loans of up to Rs500 million at 5% and the 200% enhanced capital allowance for qualifying BOI-approved export-oriented manufacturing investments of at least US$3 million. They say processing technology and cold-chain capacity need investment. Those proposal limits and eligibility conditions remain distinct from any particular business receiving a loan or tax concession.

The association also welcomed proposed Northern fisheries infrastructure spending, including Pesalai Harbour and anchorages, and funding for sustainable resource management. It wants workable Customs and temporary-import arrangements for value-added exports, alongside the National Single Window for Trade. It says implementation, access to incentives and sustainable fisheries management will determine whether the growth target can be met.

November 13 evening: teachers' union challenges allowance omissions

Ceylon Teachers' Union general secretary Joseph Stalin said at a November 13 briefing that the Budget had disappointed teachers and principals. He said it did not address the remaining two-thirds of their salary anomaly or announce the increases they had sought in teacher and principal allowances. These are the union's claims about its demands and the Budget, not a finding that all public-sector allowances were left unchanged.

He said the union had sought a hardship-area allowance of Rs15,000 and benefits reflecting principals' administrative-service status. He also argued that parents were being asked to fund too many school needs and that education required greater resources. The report of his briefing did not establish a negotiated settlement or a new nationwide teachers' strike.