JAAF warns of risks in premature SVAT removal

The Joint Apparel Association Forum (JAAF), while joining the bandwagon in welcoming Budget 2025, expressed serious concern over the potential impact of a premature removal of SVAT without a clear, well-tested alternative. 
The Forum was among those who advocated for a digitally driven VAT refund solution with minimal human intervention, ensuring efficiency and transparency.

“A poorly managed transition could create cash flow constraints for exporters, disrupt operations, and damage Sri Lanka’s reputation as a stable sourcing destination, especially at a time when global brands prioritise supply chain reliability,” it said in a statement to the media yesterday.

The apparel sector plays a critical role in Sri Lanka’s export economy, contributing over 40 percent to total merchandise exports. 

JAAF reiterated that ensuring a smooth and transparent transition from SVAT is crucial to maintaining the apparel industry’s competitiveness and sustaining investor confidence. 

Timely VAT refunds and a robust mechanism to prevent delays will be key to safeguarding liquidity for exporters, it stressed.

The Forum urged the government to work closely with industry stakeholders to ensure a seamless VAT transition, incorporating efficient digital refund processing mechanisms to prevent disruptions. 

Meanwhile, it noted that the proposed private sector wage increases should, as indicated, be coupled with the removal of the two Budgetary Relief Allowance Acts so that the National Minimum Wage becomes a consolidated value, including all allowances.

The industry apex body further highlighted the importance of consistent engagement with industry stakeholders to ensure that policy decisions reflect the realities of the business environment.

“Clarity on tax administration, timely execution of trade facilitation measures, and continued focus on export competitiveness will be critical to meet the ambitious export targets,” it said.

Commenting on the proposals, JAAF said the budget’s commitment to economic stabilisation and a competitive business environment marks a positive step forward for Sri Lanka’s textile and apparel sector. It acknowledged that the expansion of Sri Lanka’s Free Trade Agreements (FTAs) aligns with the strategy to protect existing market access while pursuing new partnerships with key global markets.

Similarly, initiatives such as the National Single Window, e-cargo tracking, scanners, revisions to Customs law, and improvements in logistics and Customs yards are crucial steps toward enhancing the ease of doing business.
“Measures such as revisiting the Economic Transformation Act and introducing the proposed Investment Protection Bill will further strengthen investor confidence and drive export growth,” it said. “We look forward to collaborating with the government on the National Export Development Plan, National Tariff Policy, and the adoption of digital architecture to streamline trade processes,” said JAAF.