ECONOMYNEXT – A Sri Lanka rubber merchants group has mentioned the federal government’s resolution to abolish the Simplified Worth Added Tax (SVAT) scheme from October 1 would trigger ‘extreme and far-reaching penalties’, and urged it to vary or section it out.
“Eradicating SVAT with no examined and operational refund mechanism will set off widespread monetary misery throughout Sri Lanka’s pure rubber trade, threatening smallholder livelihoods, SME viability, export competitiveness, and international alternate inflows important to the nation’s restoration,” the Colombo Rubber Merchants’ Affiliation (CRTA) mentioned in a press release.
Different export chambers have voiced related considerations.
Sri Lanka’s pure rubber sector helps tens of 1000’s of smallholder farmers, CRTA identified.
“The elimination of SVAT will drive producers to pay billions in VAT upfront, inflicting delays in buying uncooked rubber and exerting downward strain on farm gate costs.”
SMEs throughout the rubber provide chain — who present important uncooked supplies, processing, and companies — will likely be disproportionately affected, the affiliation mentioned.
“With restricted entry to financing, these companies can not take up the burden of upfront VAT funds, placing many getting ready to collapse.
“Such a collapse would reverse many years of progress in constructing native worth chains, destroy jobs, and erode the economic spine of Sri Lanka’s rubber financial system.”
Exporters already strained by excessive operational prices and unstable international demand now face crippling liquidity dangers as a result of uncertainty over VAT refund timelines, it mentioned.
“With out SVAT, these firms will likely be compelled to tie up working capital or resort to costly borrowing, additional squeezing already skinny margins.”
“Many firms merely can not afford to have their money blocked for 45 days or extra,” Harin de Silva, Chairman of CRTA mentioned.
“If this occurs, they are going to be compelled to cut back operations, delay funds, and even shift to importing uncooked supplies — placing native suppliers in danger and discouraging international funding.”
Though Sri Lanka’s Inland Income Division (IRD) has promised VAT refunds inside 45 days, CRTA factors out that there’s a full insecurity within the readiness of the system.
“The proposed risk-based digital refund mechanism continues to be in its infancy, with essential parts akin to e-invoicing but to be totally carried out.”
CRTA requested the federal government to:
– Defer or section out SVAT solely after a totally operational and confirmed digital refund mechanism is in place
– Shield smallholder farmers and rural communities whose incomes depend upon uninterrupted market entry
– Help SMEs from money movement shocks that might result in widespread closures
– Safeguard Sri Lanka’s export financial system and protect urgently wanted international forex inflows
“Eradicating SVAT within the absence of a functioning refund system dangers plunging all the worth chain into chaos. The
Authorities should act responsibly and decisively to forestall irreversible injury,” de Silva mentioned. (Colombo/Sep28/2025)
