The Joint Apparel Association Forum (JAAF) today reaffirmed its commitment to working with
government authorities as Sri Lanka prepares to remove the Simplified Value Added Tax (SVAT)
scheme on 1st October.
While emphasising that the removal of SVAT is now inevitable, JAAF noted that the industry has
been in continuous dialogue with policymakers on the transition, highlighting potential challenges
and the importance of timely solutions. JAAF is encouraged by the repeated assurances from the
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.
Cash flow and supply chain concerns
The apparel sector, which contributes significantly to Sri Lanka’s export earnings, estimates that
around LKR 12 billion will be paid in VAT to the Inland Revenue Department (IRD) once SVAT
is removed. Exporters are entitled to refunds of this amount within 45 days. Timely refunds are
therefore critical to managing cash flows in an industry already under pressure from declining
global prices and US reciprocal tariffs. In addition, the removal of SVAT will directly impact
suppliers to the industry. The deemed exporters who have helped build a USD 1 billion raw
material base in Sri Lanka will face immediate competitiveness challenges.
System readiness and implementation risks
While authorities have committed to processing refunds within 45 days, JAAF noted that no pilot
scheme has been carried out to prove the system’s readiness. Challenges also remain in aligning
data between Sri Lanka Customs, the IRD, and exporters, with a full resolution still pending. “The
industry has consistently highlighted the need for robust systems before SVAT removal. RAMIS
has had performance issues in the past, and JAAF had requested an e-invoicing solution that would
ensure a seamless digital refund system. Whilst acknowledging that some work has begun on this
pilot project is still at the technical stage and will not be ready in time for the 1 October deadline,”
a JAAF spokesperson said.
Call for pragmatic implementation
Exporters stress that 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,” the spokesperson added.
JAAF reiterated that it will continue to work closely with the IRD, Customs, and other relevant
authorities to ensure the transition is managed with minimal disruption to Sri Lanka’s export
competitiveness.
