The Joint Apparel Association Forum (JAAF) has raised concerns over the removal of the Simplified Value Added Tax (SVAT) scheme, set to take effect on Oct. 1, warning that untested refund systems could disrupt Sri Lanka’s export sector.
Issuing a statement, JAAF said while the forum is committed to working with the government authorities to remove the SVAT, it has repeatedly highlighted the need for a proven, seamless refund mechanism to safeguard cash flows and maintain industry stability.
The apparel industry, one of the country’s largest foreign exchange earners, estimates it will pay about Rs. 12 billion in VAT to the Inland Revenue Department (IRD) once SVAT ends, JAAF said.
Exporters are legally entitled to refunds within 45 days, but JAAF stressed that delays would put pressure on cash flows and supply chains already hit by falling global prices and reciprocal tariffs from the United States.
Suppliers to the industry — deemed exporters who helped develop Sri Lanka’s USD 1 billion raw material base — are also expected to face immediate competitiveness challenges.
While the IRD has given assurances that refunds will be processed faster than the 45-day legal limit, JAAF said no pilot scheme has been conducted to prove the system’s readiness.
It also flagged unresolved issues with aligning data between Customs, the IRD, and exporters. The industry previously urged the adoption of an e-invoicing solution to ensure a seamless digital refund process, but the pilot project remains at the technical stage and will not be ready before Oct. 1.
“Ensuring refunds within 45 days will make the difference between continuity and disruption for thousands of exporters,” a JAAF spokesperson said, calling for a phased or deferred implementation until systems are fully proven, similar to the approach taken with VAT on digital services.
JAAF said it will continue to work with the IRD, Customs, and other authorities to minimize disruption to export competitiveness during the transition. (Newswire)
