ECONOMYNEXT – Cabinet has agreed to postpone the repeal of the simplified value added tax (SVAT) to April 1, 2025.
The government had previously announced that the SVAT would be repealed on January 1, 2024.
But industry stakeholders and trade bodies had expressed concerns that Sri Lanka’s exporters would be hit hard if the SVAT system is repealed without a strong value-added tax repayment system.
“A lot of points were put forward on how the proposal to repeal SVAT would negatively impact our exporters,” Minister Bandula Gunawardena said at the Cabinet decisions press briefing.
“We are sensitive to exporters’ concerns. So in order to create more advantageous conditions for them, the President in his capacity as the Finance, Economic Stabilization and National Policies Minister, submitted a proposal for revision of the date of implementation of the relevant provisions to repeal SVAT,” Gunawardena said.
Earlier, the Joint Apparel Association Forum had said the removal of the SVAT scheme would hurt Sr Lanka exporters who are already hit by a demand contraction in overseas markets, and discourage domestic input purchases.
Sri Lanka’s Ceylon Chamber of Commerce welcomed the decision.
“This postponement allows businesses and individuals, particularly exporters, ample time to adjust operations to adapt to the impending changes,” the Chamber said in a statement.
“It also affords the government the necessary space to establish a strong tax repayment mechanism. These efforts would ensure a smoother transition and mitigate the risk of financial instability, thereby aiding in the country’s overall economic well-being.
“We view this as a positive step towards collaborative policymaking, which is beneficial to the country’s overall economic landscape.”
Sri Lanka chamber suggests French alternative to scrapping SVAT
The SVAT system was introduced to avoid delays in getting VAT refunds from the revenue authorities which had taken as much as 18 months before the system. (Colombo/Sep13/2023)