ECONOMYNEXT – A Sri Lanka rubber merchants group has stated the federal government’s choice 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 overseas change inflows important to the nation’s restoration,” the Colombo Rubber Merchants’ Affiliation (CRTA) stated in an announcement.
Different export chambers have voiced comparable considerations.
Sri Lanka’s pure rubber sector helps tens of 1000’s of smallholder farmers, CRTA identified.
“The removing of SVAT will power producers to pay billions in VAT upfront, inflicting delays in buying uncooked rubber and exerting downward stress on farm gate costs.”
SMEs inside the rubber provide chain — who present important uncooked supplies, processing, and providers — will likely be disproportionately affected, the affiliation stated.
“With restricted entry to financing, these companies can’t soak up the burden of upfront VAT funds, placing many on the point of collapse.
“Such a collapse would reverse many years of progress in constructing native worth chains, destroy jobs, and erode the commercial spine of Sri Lanka’s rubber financial system.”
Exporters already strained by excessive operational prices and unstable world demand now face crippling liquidity dangers because of uncertainty over VAT refund timelines, it stated.
“With out SVAT, these corporations will likely be pressured to tie up working capital or resort to costly borrowing, additional squeezing already skinny margins.”
“Many corporations merely can’t afford to have their money blocked for 45 days or extra,” Harin de Silva, Chairman of CRTA stated.
“If this occurs, they are going to be pressured to cut back operations, delay funds, and even shift to importing uncooked supplies — placing native suppliers in danger and discouraging overseas 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 remains to be in its infancy, with essential elements reminiscent of e-invoicing but to be totally carried out.”
CRTA requested the federal government to:
– Defer or section out SVAT solely after a completely operational and confirmed digital refund mechanism is in place
– Shield smallholder farmers and rural communities whose incomes rely upon uninterrupted market entry
– Assist SMEs from money move shocks that might result in widespread closures
– Safeguard Sri Lanka’s export financial system and protect urgently wanted overseas foreign money 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 stop irreversible harm,” de Silva stated. (Colombo/Sep28/2025)
