FAAMA holds AGM, raises concerns over market turbulence as SVAT removal effects

Fabric and Apparel Accessory Manufacturers Association (FAAMA) held its Annual General Meeting (AGM) recently, with Husni Salieh of Noyon Lanka appointed as the new Chairman. 

He will be supported by Vice Chairmen Niroshan Samarasinhe of Stretchline (Pvt.) Ltd and Shahid Sangani of Dynawash Ltd.

The chief guest at the event was Board of Investment (BOI) Chairman Arjuna Herath while Export Development Board (EDB)Chairman and CEO Mangala Wijesinghe graced the occasion as the guest of honour.

In his address, outgoing Chairman Samal Dissanaike raised the growing concerns of his members regarding the impact of the new VAT Act and the scheduled withdrawal of the Simplified VAT (SVAT) system on October 1. He also stressed on the point that both the BOI and EDB should make every effort to look after the interests of the exporters and supply chain in the country if the government’s ambitious export growth targets are to be met in the future.

Dissanaike highlighted two major implications for the FAAMA members. Firstly, significant amounts of cash would now be tied up in VAT payments to the Inland Revenue Department (IRD) as payment for any particular month would now be due on or before the 20th day of the following month. He pointed out that given most companies have their prior agreed customer settlement credit periods of 60, 75, 90 days, etc. the system change would further strain working capital issues and increase financing costs.

Secondly, local suppliers risk becoming less attractive compared to direct imports sourced by apparel manufacturers as this method would prevent their cash being blocked with the IRD for a minimum 45-day period. If this trend catches on the locally sourced portion of approx. US $ 1 billion could drastically reduce and could also hamper employment in the country in the future.

Wijesinghe while acknowledging the concerns raised by Dissanaike emphasised that the FAAMA should focus on free trade agreements (FTAs) already available and try to boost exports. He also mentioned of the ongoing efforts for a new FTA with Japan.

Herath indicated that the IRD is giving positive consideration to the inclusion of indirect exporters in the ‘eligible exporter’ category. He emphasised that such a move would be critical to sustaining operations and ensuring the continued viability of businesses within the sector.

With the removal of the SVAT scheme just days away, the exporters remain anxious about the IRD’s readiness to process refunds efficiently — a delay that could pose significant challenges to industry cash flow.

However, Herath’s remarks offered the FAAMA members a glim of hope.