The government will go ahead with the abolition of Simplified VAT (SVAT) system on January 1, 2024, despite vehement opposition from exporters and businesses.
The Cabinet office yesterday said the bill prepared to amend Value Added Tax Act of No.14 of 2022 by the Legal Draftsman has received clearance from the Attorney General.
President Ranil Wickremesinghe in his capacity as the Minister of Finance, Economic Stabilisation and National Policies proposed to abolish SVAT to introduce a more formal methodology for VAT repayment. 

The proposal received Cabinet approval on June 5, 2023. With clearance from the Attorney General, the Cabinet this week granted its approval for the bill to amend the VAT Act to be published in the Government Gazette and to submit it to parliament consequently for approval.
SVAT was introduced in April 2011 to specifically help the export trade as there were long delays, inefficiencies and misuse in settling VAT refunds by the Inland Revenue Department under the previous system. 

Exporters fear abolishment of the SVAT system could lead to cash flow constraints for them as their funds would be blocked for a longer period, adding to their finance costs.
They also worry that the move would result in increased cost of operations due to additional overheads on documentation and follow ups with IRD and the need to work with intermediaries that would pave the way for corrupt practices.