The National Chamber of Exporters of Sri Lanka (NCE) expresses its strong opposition to the planned lifting of the Simplified Value Added Tax (SVAT) system, scheduled for April 2025.
In a media release, the NCE highlighted the potential negative impacts on the export sector and the broader economy if this crucial mechanism is abolished without a functional alternative in place.
Excerpts:
“The SVAT system was introduced to address significant challenges faced by exporters under the traditional VAT framework. By deferring VAT payments and simplifying the refund process, SVAT has provided several key benefits.
“Exporters currently avoid the financial strain of upfront VAT payments, allowing better allocation of resources towards business operations and expansion.
“SVAT has streamlined the VAT process, minimising paperwork and administrative complexities for businesses and tax authorities alike.
“The system has been pivotal in promoting exports, contributing to foreign exchange earnings and overall economic growth.
“The proposed lifting of SVAT threatens to reverse these gains, imposing severe financial and operational challenges on exporters.
“Without SVAT, exporters will have to pay VAT upfront on their purchases, straining the cash flow and tying up capital essential for business operations.
“The additional funds to cover VAT payments will increase the financial burden on exporters, hindering their growth and sustainability. Reverting to the standard VAT system will reintroduce the cumbersome paperwork and a slow refund process, diverting valuable resources away from core businesses. The inefficiencies in the current VAT refund system mean that businesses will face prolonged delays in receiving their due refunds, exacerbating cash flow issues and creating financial uncertainty.
“Smaller businesses, with less financial resilience and administrative capacity too will be disproportionately affected, risking their viability and growth.
“Sri Lanka is now focused on making the country an export-driven economy. For this, we need exporters to be strong and capable of generating the foreign currency flow into the country. It is crucial to get more exporters on board and increase the number of exporters in Sri Lanka, as well as to expand the export product basket. For these goals to be achieved, Government policies must be favourable and supportive of the export sector.
“Recent Council meetings of the NCE, which consist of over 40 leading exporters covering all products and service sectors and representing the SME to Extra Large categories, have raised concerns about the lifting of SVAT.
“The National Chamber of Exporters of Sri Lanka calls upon the Government to reconsider the lifting of the SVAT system. “We advocate to maintain the SVAT until a robust and functional VAT refund mechanism is in place,” the statement further added.
