5 July 2024 01:33 am Views - 202
Exporters yesterday confirmed that they have not received any solid information regarding a proper refund system as the withdrawal of Simplified Value Added Tax (SVAT) is set to take effect on 1 April 2025.
Sri Lanka’s export community expressed serious concern about the potential negative impacts on their businesses due to the upcoming move.
Implemented on 1 April 2022, SVAT is seen as crucial for providing liquidity and operational efficiency. Recognising its critical role, the Cabinet agreed to postpone the repeal of SVAT until 2025, pending the implementation of a proper VAT refund system.
“If SVAT is withdrawn, exporters will have to revert to the traditional VAT refund system, where they pay VAT upfront and then wait for refunds. Consequently, exporters may still face considerable challenges with VAT refunds,” cautioned National Chamber of Commerce Secretary General/CEO Shiham Marikar.
He asserted that maintaining a favourable environment for exporters is crucial for export-oriented economic growth and international trade relations.
Exporters continue to urge policymakers to engage with industry stakeholders to formulate a solution that would address their concerns while achieving the government’s fiscal objectives.
“The government must consider these factors and seek a balanced approach that supports the continued growth and stability of the export sector,” Marikar stressed.
Highlighting the relevance of SVAT, NCE President Jayantha Karunaratne noted that businesses defer VAT payments under the system, maintaining better liquidity and financial flexibility. In the VAT refund system, refunds can be delayed, causing financial strain and uncertainty. Conversely, the SVAT system minimises the risk of delays by deferring VAT payments rather than requiring refunds.
“The SVAT has helped exporters in several ways. Exporters can manage their working capital more efficiently by deferring VAT payments; this liquidity is vital for maintaining operations and investing in growth. Further, the SVAT system reduces the complexity and time involved in filing VAT refund claims,” he said.
The efficiency of the VAT refund system has historically been a concern in Sri Lanka. Delays in refunds could worsen cash flow problems and disrupt business operations. Many exporters have expressed their views about the potential withdrawal of SVAT, and as the voice of exporters, the NCE has urged authorities not to abolish SVAT without a proper VAT refund system.
The SVAT system was introduced to simplify the VAT process for exporters and zero-rated supply chain operators. It allowed these businesses to defer VAT payments on their inputs, thereby eliminating the need for extensive refunds.