JAAF stresses need for proven VAT refund system to safeguard export stability post-SVAT

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.