SVAT removal undermines Sri Lanka's export competitiveness: Shippers' Council

ECONOMYNEXT - Removing the SVAT mechanism ties up essential working capital in lengthy refund cycles, and puts Sri Lanka at a competitive disadvantage among peers, Sri Lanka Shippers' Council has said.

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"A system that immobilizes vital working capital through prolonged refund cycles places Sri Lanka at a distinct disadvantage compared to regional peers, many of who maintain supportive export incentives," SLSC chairman Trisherman Frink said.

"The removal of SVAT sends a discouraging message of policy volatility, signalling that conducting business in Sri Lanka entails hidden costs and uncertainties. Such signals threaten to divert critical foreign investments to competing economies offering greater certainty."

The Shippers' Council urged policymakers to reconsider the removal of SVAT in the national interest.

The full statement is reproduced below: Removing SVAT: Protecting Exporters, Enhancing Competitiveness and Boosting Investment

I write today to urgently highlight the critical implications of the recent government decision to abolish the Simplified Value Added Tax (SVAT) mechanism. While we commend the ongoing efforts to reform and modernize our taxation policies, it is imperative to carefully evaluate the unintended consequences that this change will impose on our exporters, the broader investment climate, and the national economy.

The Essential Role of SVAT for Exporters:

The SVAT system has long served as a vital instrument for exporters by removing the burden of upfront VAT payments and preserving essential liquidity. Exporters operate within narrow margins and extended production cycles, relying heavily on uninterrupted access to cash flow to meet daily operational costs, remunerate suppliers, and sustain employment. The abolition of SVAT means exporters will now be compelled to pay VAT in advance, then rely on refund processes that, despite governmental assurances, have historically been slow and prone to bureaucratic delays. Even minor delays in VAT refunds risk severe cash-flow disruptions, threatening operational continuity and eroding Sri Lanka's competitiveness in global markets.