Sri Lanka’s export sector is pushing back against the government’s decision to dismantle the Simplified Value Added Tax (SVAT) system in October, warning that the move could severely undermine already fragile export operations.
In a strongly worded public statement released on May 8, the National Chamber of Exporters (NCE) urged the government to reconsider the timing of the SVAT removal. “The export community is not asking for indefinite protection,” said NCE President Indhra Kaushal Rajapaksa. “But we are pleading—do not dismantle SVAT this year. Exporters are already under pressure from rising energy and logistics costs, global trade uncertainty, and domestic inflation.”
A Proven System Under Threat
SVAT, first introduced in 2005 and refined in 2011, was designed to streamline tax compliance for exporters by eliminating upfront VAT payments. This enabled businesses to preserve working capital and avoid the often-lengthy VAT refund process.
The proposed removal, intended to take effect by the end of October as part of broader fiscal reforms aligned with IMF recommendations, has alarmed exporters. They fear a return to the pre-SVAT era marked by bureaucratic inefficiencies, refund delays, and liquidity shortages.
“Exporters remember the pre-SVAT era all too well,” the NCE warned. “Refund delays stretched for months, cash flow gaps widened, and many businesses had to borrow at high interest rates just to survive.”
Call for Smart, Phased Reform
While exporters are not opposed to reform, the NCE emphasizes the need for a data-driven, phased approach. “There has been no transparent evidence presented to justify the claim that SVAT is being misused,” said NCE Secretary General and CEO Shiham Marikar. “Even the Inland Revenue Department admits the removal won’t significantly boost tax revenue. So why the rush?”
The NCE also drew attention to Sri Lanka’s outdated refund infrastructure, pointing out that developed countries process VAT refunds within 30 days through fully digitized systems. In contrast, Sri Lankan exporters face refund delays of 3–6 months or more.
“We support digitisation. We support efficiency,” Rajapaksa said. “But we cannot support premature changes that jeopardise businesses and livelihoods. Until the Inland Revenue Department, Customs, and Ports Authority are seamlessly integrated and tested, SVAT must remain.”
In a final plea, Rajapaksa urged policymakers to give exporters “the space to breathe and grow” and warned against penalizing the sector for systemic inefficiencies beyond its control.