ECONOMYNEXT – Sri Lanka’s exporters will have to pay interest on cashflow given to the state as result of charging value added tax on local inputs, following the scrapping of the so-called SVAT scheme, apparel exporter said.
The Department of Inland Revenue said exporters will be categorized as low, medium and high risk.
Low and medium risk exporters will be given refunds without an audit after then submit returns.
Exporters will be categorized as high risk based on their past interactions with customs, inland revenue and also the central bank.
Other may have to wait up to six months to get a return until an audit is done.
Apparel exporters alone will have to pay 2.6 billion rupees a year interest, even if the VAT is refunded within 45 days as promised, Yohan Lawrence, Secretary General of the Joint Apparel Exporters Forum told an exporters forum at Sri Lanka’s Export Development Board.
This would be the outcome if every exporter was rated low or medium, he said.
Another outcome will be that exporters will stop buying local inputs, and working with domestic subcontractors as that will now be more expensive than sourcing imported inputs or subcontracting for foreign factories, exporter said at the forum.
The scrapping of the SVAT is has been proposed in part due to so-called ‘leakages’ but there has been no evidence to show that leakages have taken place, some exporters have said earlier.
It is also not fair to impose collective punishment on all exporters, without catching and punishing those who are supposed to have mis-used the system, they have said.
There was no mention of leakages at Monday’s forum.
There has been a high-profile VAT fraud several years ago which in part led the setting up of the SVAT system.
Sri Lanka’s Inland Revenue Department however said a simulation will be done to prove that the system works before it is implemented. (Colombo/Mar25/2025)