Top business chambers challenge VAT collection without refund system

SAY DECISION WAS "UNLAWFUL, UNREASONABLE AND A VIOLATION OF CONSTITUTIONAL RIGHTS" QUESTION IRD'S ASSURANCES THAT REFUNDS WOULD BE MADE WITHIN 45 DAYS, GIVEN THAT LONG-OUTSTANDING REFUNDS DATING BACK TO 2010 REMAIN UNSETTLED

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Three leading business chambers in Sri Lanka have filed a writ application in the Court of Appeal, challenging the Inland Revenue Department's (IRD) move to collect the Value Added Tax (VAT) from October 1, without first implementing the legally mandated automated refund mechanism.

The Free Trade Zone Manufacturers' Association, National Chamber of Commerce of Sri Lanka and Sri Lanka Chamber of Small and Medium Industries said the decision was "unlawful, unreasonable and a violation of constitutional rights".

The petitioners, representing the exporters, deemed the exporters, subcontractors, service providers in the export supply chain, small and medium enterprises (SMEs) and wider business community, said collecting the VAT from export-related businesses without a proper functioning refund system and without publishing the conditions of the proposed risk-based refund scheme in the gazette, is unlawful.

They noted that the abolition of the Simplified VAT (SVAT) scheme earlier this year was tied to a statutory requirement for a new automated, risk-based refund system to be in place by October 1, 2025.