If Finance Ministry officials confirmed in the COPE meeting (with Harsha de Silva) that Uber will be treated as the principal supplier, then Sri Lanka is moving toward a position very similar to the UK after the Supreme Court and ECJ rulings.What “Principal Supplier” Means Here
- Uber (the platform) is considered the one supplying the transport service to the passenger (not just acting as an intermediary/app).
- This means the full fare paid by the rider becomes subject to 18% VAT.
- Previously, many assumed the new digital services VAT would only apply to Uber’s commission/service fee. This confirmation shifts it to the entire ride amount.
This is a major development and aligns with what happened in the UK in 2021–2022.Will Uber Switch to an Agency Model in Sri Lanka?Yes — it is highly likely that Uber will move to an agency model, just like they did outside London in the UK in early 2026.Why they would do it:
- In a principal model → Uber must charge and remit 18% VAT on the full fare.
- In an agency model:
- The driver becomes the principal supplier of the transport service.
- The driver contracts directly with the passenger.
- VAT on the fare is only due if the individual driver is VAT-registered.
- Most drivers earn well below the VAT threshold (even the new lower threshold of LKR 36 million), so no VAT is charged on the majority of fares.
- Uber only charges 18% VAT on its own commission/service fee.
This is exactly the strategy Uber used in the UK to neutralise the VAT impact outside London.Likely Outcomes
| Scenario | VAT on Full Fare? | Who Pays/Remits VAT | Likely Fare Impact | Uber’s Likely Action |
|---|
| Principal model | Yes | Uber | Fares increase by ~18% | Unlikely long-term |
| Agency model | No (mostly) | Only if driver is registered | Minimal increase | Very likely |
What This Means in Practice
- For passengers: If Uber switches to agency model, fares are unlikely to jump significantly (similar to outside London in the UK).
- For drivers: They would become directly responsible for the transport contract. Most will stay below the VAT threshold, so little change for them.
- For competition: This would help Uber stay price-competitive with traditional taxis and PickMe (local platforms).
- For the government: They would collect much less VAT revenue than if Uber stayed as principal (which is probably why Harsha de Silva was questioning it).
Important NotesThis is still based on what was reportedly said in the COPE meeting. Until it is formally gazetted or clarified in writing by the Inland Revenue Department, there is some uncertainty. Uber may also challenge the position legally.
