NCE calls on govt. to delay SVAT removal until systems are ready

The National Chamber of Exporters of Sri Lanka (NCE) has issued a strong and urgent call to the government - to not place additional burdens on the export sector at a time when resilience is already being tested. 

The NCE, speaking on behalf of exporters, reiterated that the removal of the Simplified Value Added Tax (SVAT) scheme must not proceed until all necessary digital and procedural reforms are fully operational and tested.

With the government announcing that SVAT will be abolished by the end of October 2025, exporters are continuing to urge the authorities to delay any action on SVAT removal this year. The Chamber pointed out that 2025 is a year already fraught with economic headwinds and external volatility. 

Originally introduced in 2005 and streamlined in 2011, SVAT was designed to circumvent the many inefficiencies of the traditional refund-based VAT system. It eliminated upfront VAT payments, enabling exporters to maintain working capital and avoid delays and bureaucratic hurdles in claiming refunds.

“The export community is not asking for indefinite protection. But we are pleading with the government to not dismantle SVAT this year. Exporters are already under pressure from rising energy and logistics costs, global trade uncertainty, and domestic inflation. Now is not the time to weaken a sector that brings in vital foreign exchange,” said NCE President Indhra Kaushal Rajapaksa.

“Give us time. Give us the space to breathe and grow. Don’t punish exporters for system inefficiencies beyond their control. Let us focus on meeting our export targets and build back stronger. Help us help the economy,” he added.

The chamber asserted that exporters remember the pre-SVAT era all too well, where they experienced refund delays stretching for months, cumbersome paperwork, and debilitating cash flow gaps. Many businesses were forced to borrow at high interest rates just to survive. 

The NCE warned that a return to such conditions—without a fully functional, integrated, and tested VAT refund system—would be a severe policy misstep.

“We are not against reform,” said Shiham Marikar, Secretary General and CEO of the NCE. “But reform must be smart, gradual, and data-driven. To date, there has been no transparent evidence presented to justify the claim that SVAT is being widely misused. Even the Inland Revenue Department has admitted that SVAT’s removal will not significantly improve tax revenue. So why the haste?”

The NCE calls for a phased, performance-based transition to any new VAT regime. This should include: Full digital integration of the VAT system across IRD, Customs, and Ports; Pilot testing of refund processes in real-world export scenarios; An independent audit of refund timelines and bottlenecks; Public disclosure of evidence regarding alleged misuse of the SVAT scheme.

Until these benchmarks are met, the SVAT scheme should remain in place, the NCE stressed.