COLOMBO, Sept 20 (Reuters) - Sri Lankan shares fell for a fourth straight session on Tuesday, led by large caps, as selling pressure on stocks expected to take a hit from a proposed tax increase weighed on sentiment.

The benchmark Colombo stock index ended 0.32 percent weaker at 6,429.94, its lowest close since Aug. 1. It fell 0.34 percent last week, its fourth straight weekly loss.

A government proposal last week to raise the value added tax (VAT) to 15 percent from 11 percent hit sentiment on Tuesday.

ADVERTISEMENT

"The downtrend continued today also. The selling pressure is there mainly on the shares that could be affected by the tax," said Dimantha Mathew, head of research at First Capital Equities (Pvt) Ltd.

"Going forward, we don't think this trend of correction will last long."

Turnover stood at 458.6 million rupees ($3.15 million), less than this year's daily average of 740.4 million rupees.

Foreign investors net bought 145.4 million rupees worth of equities on Tuesday. They have net sold 2.1 billion rupees worth of shares so far this year.

Distilleries Company of Sri Lanka fell 1.67 percent, with foreign investors buying a net 132,693 shares in the company on Tuesday.

ADVERTISEMENT

The company said last month that it would rejig a share ownership with Melstacorp, its 100 percent-owned subsidiary.

The reorganisation will occur after Sept. 30.

Shares of Ceylon Tobacco Company Plc fell 1.07 percent, while the biggest listed lender Commercial Bank of Ceylon Plc declined 1.13 percent. ($1 = 145.7000 Sri Lankan rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Biju Dwarakanath)