Exporters fear $ 80 m monthly cash crunch if SVAT removed and no refund system

WITH just five days to go before the Government abolishes the Simplified Value Added Tax (SVAT) regime, leading export associations yesterday voiced deep concerns and warned of a looming cash flow crisis that could choke the country's $ 19 billion export target for 2025.

- CHARUMINI DE SILVA

At a joint press briefing, representatives from a range of key export industries stressed that while the move is framed as aligning with International Monetary Fund (IMF)-backed reforms, the absence of a tested and functioning VAT refund mechanism threatens to withhold nearly 8% of export earnings or about $80 million each month from the sector.

Noting that exporters fully support the Government's revenue recovery efforts, they claimed even a 45-day delay in refunds, let alone longer lags that have historically stretched for years, would impose crippling financing costs, undermine competitiveness against regional rivals, and derail investment at a time when Sri Lanka desperately needs foreign exchange.

Joint Apparel Association Forum (JAAF) Secretary General Yohan Lawrence reaffirmed its commitment to working with the Government as it prepares to remove the SVAT scheme on 1 October, whilst stressing a seamless refund mechanism is critical to maintaining industry stability.

"Ensuring refunds within 45 days will make the difference between continuity and disruption for thousands of exporters.

We respectfully urge that implementation be phased or deferred until systems are fully proven, as was the case with VAT on digital services," he added.

He noted that the industry has been in continuous dialogue with policymakers on the transition, highlighting potential challenges and the importance of timely solutions. The JAAF is encouraged by the repeated assurances from the Inland Revenue Department (IRD) that the systems are ready to do the refunds sooner than the legally mandated 45-day window, but notes that there was "no trial done" on this to demonstrate the ability of the same.