The basis on which VAT is charged on cinema tickets will change under the 2027 Budget, with film producers, distributors, cinema hall operators and the National Film Corporation each taxed on their own share of ticket revenue rather than on the full ticket price.
VAT will be calculated on the ticket value after Entertainment Tax is deducted but before VAT is added, the Daily Mirror reported from the budget speech.
Each party’s liability is then determined by the share of ticket revenue it receives at its stage of the distribution and exhibition chain. LankaBusinessOnline reports the obligations will be “calculated strictly based on each party’s respective share of ticket revenue, assessed on the ticket value after Entertainment Tax but prior to VAT.”
The practical effect is to move the tax from a single calculation on the whole ticket to separate calculations at each stage, so that no participant is assessed on revenue that goes to someone else in the chain.
The wider VAT package
The cinema measure sits inside a broader set of amendments to the Value Added Tax Act No. 14 of 2002. LankaBusinessOnline reports three further administrative changes:
- Digital and electronic tax invoices will carry the same legal validity as paper invoices, with technical standards and formats to be gazetted by the Commissioner General of Inland Revenue.
- The definition of an “eligible exporter” is broadened to include newly VAT-registered entities that derive more than 80 per cent of turnover from exports over the preceding six months.
- Businesses transacting in foreign currency must apply the Central Bank of Sri Lanka’s indicative exchange rate, as specified by the Commissioner General, when converting amounts into rupees for VAT purposes.
The same package exempts books and printed material from VAT, covered separately in Budget 2027 exempts books and printed material from VAT.
LankaBusinessOnline states the amendments take effect from 1 April 2027, on passage of the formal legislative changes. The Daily Mirror filing carries no effective date.
Not reported
Neither source gives the revenue effect of the cinema VAT change, the current Entertainment Tax rate, or the typical revenue split between producers, distributors, exhibitors and the National Film Corporation — the figures that would show who gains and who loses. Neither quotes anyone from the film industry.
On sourcing: Ada Derana also carried this measure, under the headline “Government proposes changes to VAT calculation in film industry.” That site has returned a 403 block to this desk for several weeks, so its filing could not be fetched or date-verified and is not cited above. A figure for the revenue cost of the VAT revisions is circulating in search results; LankaNewz has not reproduced it, because it does not appear in either source fetched for this report.
