IRD clears significant VAT refund backlog

• A large portion of refund backlog has been cleared this year 
• Collaborative efforts with taxpayers are underway to resolve remainder

 By Nishel Fernando

The Inland Revenue Department (IRD) has disbursed a large portion of its long-standing tax refund backlog this year, following a targeted intervention by the Finance Ministry to address a major grievance within the business community. 

While significant progress has been made, the officials state that a joint effort between the department and taxpayers is crucial to clear the remaining cases.

The development was confirmed in Colombo recently by Finance and Planning deputy Minister Dr. Harshana Suriyapperuma, who acknowledged the persistent complaints regarding the processing delays.
“We have heard the common complaint in recent days about the time it takes to get a refund from the IRD,” Dr. Suriyapperuma stated. 

“That’s why we, along with the Finance Ministry, have intervened. As I’ve been informed by the IRD, a large number of refunds have been disbursed this year alone and efforts are being made to resolve related issues.”

To tackle the operational challenges, the IRD has implemented a multi-faceted strategy. According to a presentation by IRD Risk Management Unit Commissioner Priyanka Dissabandara, a high-level “Refund Expediting Committee” has been formed. This committee, consisting of senior officials, is empowered to make the necessary management decisions to fast-track the pending refunds.

Internally, the department is actively identifying and prioritising open work items, particularly for the eligible exporters and has directed the officials to accelerate their closure. For the intractable cases, the IRD is classifying them based on the specific difficulties faced to devise the targeted solutions.

The IRD stresses that the taxpayers also have a key role in accelerating the refund process. To ensure the smooth processing of claims, the businesses are urged to take several actions. These include confirming receipt of permanent acknowledgements for all submitted returns, promptly submitting all requested documents and corrected SVAT forms, attending all scheduled interviews with the IRD and settling any other outstanding tax liabilities.

These initiatives are part of a broader internal reform designed to streamline the operations. By establishing a robust framework for taxpayer cooperation, the IRD aims to systematically eliminate the existing backlog and create a more responsive tax administration.

A key development on the horizon is the transition to a sophisticated risk-based VAT refund system, which is set to become operational from October 1, 2025. This new system represents a pivotal shift, moving away from the current process to an approach that leverages risk analysis to prioritise and expedite legitimate refunds while mitigating fraudulent claims. The implementation of this advanced system is a significant step in the IRD’s goal of modernising its operations and creating a more transparent, user-friendly experience for taxpayers.