Chambers challenging new VAT regime:

THE Court of Appeal has fixed the case challenging VAT collection without refund system and abolition of SVAT for support on 6 November 2025.

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When the case was taken up on 24 October 2025 the petitioners representing multiple chambers, informed Court that the Inland Revenue Department (IRD) has issued a Gazette which has an impact on the relief sought in the Petition. The petitioners, however, do not concede that this Gazette satisfies the mandatory requirement of publication of conditions as stipulated under the provisions of the Value Added Tax Act.

The petitioners further notified Court of their intention to challenge the said gazette and accordingly have filed an amended petition to include this new development.

The legal action by the Free Trade Zone Manufacturers' Association (FTZMA), together with the National Chamber of Commerce of Sri Lanka (NCCSL) and the Sri Lanka Chamber of Small and Medium Industries, was filed before the Court of Appeal on 30 September 2025 challenging the Inland Revenue Department's (IRD) decision to commence collecting Value Added Tax (VAT) from 1 October 2025 without first operationalising the legally mandated automated refund mechanism.

The petitioners, representing exporters, deemed exporters, sub-contractors to exporters, service providers in the export supply chain, SMEs, and the broader business community, said that collecting VAT from exportrelated businesses without a proper functioning refund system, and without publishing the conditions of the proposed risk-based refund scheme in the gazette, is unlawful, unreasonable, and a violation of constitutional rights.