Apparel

Sri Lanka apparel exporters warn against ending VAT refund scheme

Thursday July 25, 2024 9:34 am

ECONOMYNEXT – Sri Lanka’s apparel firms have warned against ending a special value added tax (SVAT)_scheme which avoided upfront payments and protected cashflows from delays in tax refunds by the government.

The SVAT scheme is due to be abolished under International Monetary Fund backed program to streamline the tax system.

While authorities have committed to “significantly speed up valid VAT refunds” the apparel industry say it has not seen measurable improvements on time taken for refunds as yet, according a statement from Sri Lanka’s Joint Apparel Association Forum (JAAF).

“The apparel sector is currently grappling with significant challenges in the global market, which is already being reflected in reduced export figures,” Bandula Fernando, Chairman, Sri Lanka Chamber of Garment Exporters, which represents the SME sector with JAAF said in a statement.

“Failure to reconsider this policy will almost certainly exacerbate financial strain on the sector, and further erode Sri Lanka’s export competiveness as funds will inevitably be tied up in refund processes, even in the most efficient systems.”

Any decision to proceed with abolition of the SVAT scheme in the absence of any tangible progress on speeding up valid VAT refunds would be catastrophic, particularly for the SME sector, Fernando has said.

The full statement is reproduced below:

Time is running out: JAAF calls on GoSL to urgently reconsider SVAT abolition

With the countdown to the forthcoming abolition of the Simplified Value-Added Tax (SVAT) system ticking down to an end date of 1st April 2025, the apex body of the Sri Lankan apparel industry, the Joint Apparel Association Forum (JAAF) urged the Government to urgently reconsider its decision in light of growing stresses on the industry.

“The apparel sector is currently grappling with significant challenges in the global market, which is already being reflected in reduced export figures. At such a time, the removal of SVAT without first establishing a viable and efficient refund mechanism is going to drastically disrupt cash flows for all exporters including the apparel industry, which makes up nearly half of the nation’s entire export portfolio. Failure to reconsider this policy will almost certainly exacerbate financial strain on the sector, and further erode Sri Lanka’s export competiveness as funds will inevitably be tied up in refund processes, even in the most efficient systems,” said Bandula Fernando, Chairman, Sri Lanka Chamber of Garment Exporters – which represents the SME sector with JAAF.

While authorities have committed to “significantly speed up valid VAT refunds” the apparel industry has maintained its position that this commitment has not been met with no measurable improvements on time taken for refunds having been achieved as yet.

According to Fernando, any decision to proceed with abolition of the SVAT scheme in the absence of any tangible progress on speeding up valid VAT refunds would be catastrophic, particularly for the SME sector.

“The SME sector is really struggling right now and if the removal of the SVAT system goes ahead this will be a major burden on the cash flows of the SME sector. Despite the law requiring for refunds to be made within 45 days, exporters have legitimate VAT refunds due as far back as 2010 and no interest is paid on these delayed refunds. In that time, the Sri Lankan rupee has lost 69% of its total value. Such inefficiencies will create insurmountable obstacles for SME apparel exporters, and severely erode cash flows even for larger players,” he noted.

Meanwhile, JAAF Secretary General, Yohan Lawrence stressed that JAAF and its members recognize and appreciate the Government’s need to meet revenue targets as part of the IMF program However, he noted that the decision to remove the SVAT scheme had unfortunately been made on two incorrect assumptions, namely: that the current system creates revenue erosion and that the removal of SVAT would enhance the revenue collection for the State.

“This claim has not been substantiated in respect of the formal apparel sector where the SVAT system is used for the sourcing of intermediary goods for the manufacture of apparel. The industry has been on a journey of backward integration whereby supply of raw materials has moved away from being imported to being manufactured locally. Removal of the SVAT system will reverse this trend, leading to more imports,” Lawrence cautioned.

According to industry experts, the primary effect of abolishing SVAT would be increased cash flow between exporters and the IRD, and not increased revenue. Sri Lanka’s history with VAT refunds prior to SVAT was marked by significant delays, with refunds due for over 18 months, creating significant financial bottlenecks for exporters.

Historically, VAT refund systems have been prone to fraud, particularly in the non-export sector. The SVAT system effectively mitigates this risk by limiting the scope for abuse. Exporters, who utilize SVAT to purchase local inputs for conversion into export products, have minimal local sales, thus reducing potential misuse. Conversely, the likelihood of fraud is significantly higher in an inefficient payment and refund system compared to the voucher-based SVAT system.

Moreover, the reintroduction of a VAT refund system may compel apparel exporters to import raw materials rather than purchasing domestically. This shift would not only strain cash flows but also increase imports and reduce incentives for domestic value addition, negatively impacting the balance of trade.

Under SVAT, apparel exporters could purchase local raw materials without immediate cash outflows for VAT, promoting the use of domestically produced inputs. With the inefficient refund system, the incentive to buy local decreases. Such a scenario would eventually undermine the unique vertical integration benefits that Sri Lanka’s apparel industry offers, potentially threatening the sector’s viability and the jobs it supports.

“Reinstating a VAT refund system will demand substantial resources from the IRD for ongoing follow-ups and evaluations, leading to increased administrative costs and misallocation of precious resources. The additional burden on both the IRD and the industry is unnecessary and counterproductive,” Lawrence added

Markets

Sri Lanka stocks close down 0.60-pct, dragged by HNB and LOLC

Friday November 13, 2026 3:28 pm

ECONOMYNEXT – Sri Lanka’s Colombo Stock Exchange closed down on Friday, CSE data showed, with the benchmark All Share Price Index moving down 0.60 percent.

The ASPI was down 133.22 points at 22,024.18, while the more liquid S&P SL20 was down 1.06 percent, or 67.55 points, at 6,298.02.

The ASPI ended the week up 784.53 points from last Friday.

Positive contributors to the ASPI were Dialog Axiata (up 0.40 percent at 50.20 rupees), Distilleries Company of Sri Lanka (up 0.52 percent at 58.30 rupees), Aitken Spence (up 3.60 percent at 151.00 rupees), Ceylon Tobacco Company (up 1.05 percent at 1,828.50 rupees), and LOLC Finance (up 1.96 percent at 5.20 rupees).

Hatton National Bank (down 1.88 percent at 403.75 rupees), Richard Pieris and Company (down 6.21 percent at 27.20 rupees), LOLC Holdings (down 2.17 percent at 405.00 rupees), Sampath Bank (down 1.91 percent at 154.00 rupees), and Singer (Sri Lanka) (down 2.40 percent at 77.30 rupees) were top negative contributors.

Market turnover was 3.23 billion rupees. Capital goods led turnover with 869.21 million rupees. (Colombo/Nov13/2026)

Economy

Sri Lanka MP slams budget speech for omitting Tamil national question

Friday November 13, 2026 2:56 pm

ECONOMYNEXT – A Sri Lanka legislator has voiced strong disappointment that the President’s budget speech failed to make a single mention of the Tamil national question.

“It is very unfortunate that in His Excellency the President’s speech, there has not been a single word mentioned about the Tamil national question. Not a single word,” Shanakiyan Rasamanickam said.

“A budget speech generally, is a policy direction of the government for the next year. The budget speech is not only a statement of the country’s fiscal position or the economy’s position. It is the country’s, the government’s, plan, or what the government plans to do the following year. That’s a policy statement.”

Former presidents would at least mention the Tamil question even if it was not resolved, he said.

Former President Ranil Wickremesinghe in his speech, in his policy statement, he would mention: “The Tamil national question must be resolved,” Rasamanickam said.

Former Presidents Maithripala Sirisena and Gotabaya Rajapaksa also mentioned that the national ethnic question must be resolved, he added.

“Every President, every country’s Head of State, in their policy statements, have acknowledged the fact that there is an unresolved national issue, the Tamil national question, that it needs to be resolved. Various governments have proposed various mechanisms; none of them have succeeded, but at least it was mentioned.”

This year’s budget made allocations for the Office of Missing Persons, and the Office of Reparations.

“But the domestic mechanism is a mechanism that the victim community has rejected. So you all are allocating money to a mechanism where the victim community is not going to be part of.”

Last year’s budget 1 billion was allocated to be spent on the Trincomalee and Jaffna airports.

“Where was that 1 billion for the Trincomalee and Jaffna airports spent last year?”

“The trajectory of this government, Honourable Deputy Speaker, is worrying to me. It’s really worrying to me. Because if the objective is to say that there is no Tamil national question, if the objective is to say that you all have resolved any ethnic issue that this country faced, then Honourable Deputy Speaker, then I think the Tamil people will teach this government a very, very, very harsh lesson in the future.” (Colombo/Nov13/2026)

Bonds & Forex

Sri Lanka sells extra Rs6.5bn Treasury bills after auction

Friday November 13, 2026 12:32 pm

ECONOMYNEXT – Sri Lanka has sold 6,500 million rupees of treasury bills offered on tap at an average rate of 9.95 percent, the public debt management office said, bringing the total of bills sold in the week to 85.562 billion rupees.

The issue offered 90 billion.

Total market subscription was 6.5 billion rupees.

The debt office sold a 12-month bill at 9.95 percent.

On Wednesday (11) the debt office raised 79 billion rupees of 3, 6 and 12 month bills after offering 90 billion.

The settlement date is November 13. (Colombo/Nov13/2026)

Construction and Real Estate

Access Engineering Sept quarter group net profit surges 200-pct to Rs4.75bn

Friday November 13, 2026 12:15 pm

ECONOMYNEXT — Sri Lanka’s Access Engineering PLC recorded a group net profit attributable to equity holders of Rs. 4.75 billion for the quarter ended September 30, surging 200 percent from Rs. 1.58 billion a year earlier, interim accounts showed.

Basic earnings per share rose to Rs. 4.08 for the September quarter, up from Rs. 1.58 previously.

Quarterly group revenue expanded 36 percent to Rs. 20.39 billion from Rs. 14.94 billion, underpinned by condominium property handovers — reflected in inventories dropping Rs. 7.69 billion since March to Rs. 35.71 billion — alongside strong automobile sales and steady civil engineering execution.

Cost of sales rose at a slower 27 percent to Rs. 14.34 billion, lifting gross profit by 64 percent to Rs. 6.05 billion and expanding gross margins to 29.7 percent from 24.7 percent.

Other income jumped 144 percent to Rs. 259.9 million, while administrative expenses rose 75 percent to Rs. 1.14 billion, leaving operating profit up 64 percent at Rs. 5.16 billion.

However, finance costs more than doubled, rising 107 percent to Rs. 1.18 billion on elevated group borrowings of Rs. 43.74 billion, partly offset by finance income climbing 302 percent to Rs. 42.2 million.

Share of results from equity-accounted investees rose 122 percent to Rs. 26.7 million, pushing pre-tax profit up 56 percent to Rs. 4.05 billion.

Income tax swung to a net reversal of Rs. 186.6 million from an expense of Rs. 804.1 million, boosted by deferred tax assets on unrelieved losses from a 100 percent enhanced capital allowance claimed by 60 percent-owned radiopharmaceutical subsidiary Access Medical Tracers (Private) Limited.

Total period profit rose 136 percent to Rs. 4.24 billion, with non-controlling interest declining 24 percent to Rs. 164.9 million following last year’s buyout of minority shareholders in Harbour Village (Private) Limited.

No separate exchange gain or loss was itemized in quarterly earnings, though foreign currency translation via associates recorded a Rs. 17.4 million loss in other comprehensive income, alongside USD 16.6 million in corporate guarantees.

Notes also flagged an expected Rs. 1.45 billion recovery from the terminated South Asia Commercial and Logistics Hub project, a Rs. 225 million post-quarter legal settlement already provided for, and a Supreme Court appeal over a 2011/12 PAYE tax ruling.

Group assets stood at Rs. 132.4 billion as of September 30, with net asset value per share at Rs. 46.70, as the Employees’ Provident Fund raised its stake to 5.69 percent.

Access Engineering shares closed at 80.00 rupees at the end of September and are currently trading around 85.80 rupees. (Colombo/Nov13/2026)

Economy

Sri Lanka private sector says timely implementation of Budget 2027 key

Friday November 13, 2026 11:43 am

ECONOMYNEXT – Private sector body, The Ceylon Chamber of Commerce, said it was encouraged by the broad direction of Budget 2027, noting that it reinforces Sri Lanka’s commitment to economic transformation while maintaining policy continuity, macroeconomic stability, and fiscal discipline.

“This continuity is particularly important as the country seeks to transition from economic stabilisation to a more durable, investment-led growth trajectory.”

The chamber also noted several areas where the Budget could have placed greater emphasis to strengthen the country’s growth prospects.

“In particular, there is a need for a stronger focus on attracting Foreign Direct Investment (FDI), accelerating factor market reforms, particularly in land and labour, and fast-tracking public procurement reforms to improve the efficiency and speed of project implementation.

“More targeted and actionable proposals could have been introduced to unlock the potential of sectors with significant growth opportunities, including tourism, agriculture, IT/BPO and logistics.”

The chamber said the budget contains positive measures aimed at enhancing competitiveness, and external sector resilience, while presenting opportunities for focus on sectors that can accelerate growth.

“A number of the key structural reforms identified in last year’s Budget have been carried forward and strengthened, providing greater certainty and predictability to businesses and investors.

“These include the continued implementation of the Trade National Single Window (TNSW), the phased removal of para-tariffs, the rollout of the Digital ID framework, efforts to expand market access through new Free Trade Agreements (FTAs), the strengthening of one-stop-shop investment facilitation mechanisms, progress on Customs reforms, the expansion of Bandaranaike International Airport (BIA), enhanced financing support for SMEs, and reforms relating to the management of State-Owned Enterprises.”

The CCC said that more than 20 proposals submitted by it have been reflected in Budget 2027.

These include measures to strengthen investor facilitation through the establishment of a professionally managed investment promotion agency; continued efforts to improve trade facilitation and export competitiveness; the Government’s consideration of a successor programme with the International Monetary Fund (IMF); accelerated progress on key legislative reforms; the expansion of digital government services; and the promotion of cashless payments and broader digital adoption. The Budget has also captured several priorities relating to energy security, including the accelerated deployment of Battery Energy Storage Systems (BESS) and investments in fuel storage infrastructure, initiatives to optimize underutilized agricultural land, measures to support the expansion of the digital economy and the IT/BPO sector, and tax reforms to support exporters, including the acceptance of newly VAT-registered exporters as eligible exporters.

“The inclusion of these priorities reflects the value of sustained public-private dialogue and demonstrates increasing alignment between national policy objectives and the needs of a competitive, export-oriented economy.

“The priority now must be effective and timely implementation to translate policy commitments into investment, competitiveness, exports and sustainable growth.” (Colombo/Nov13/2026)