FTZMA commends govt.’s proposal to extend SVAT beyond April 2025

The Free Trade Zone Manufacturers Association (FTZMA) recently expressed its full support for the government’s proposal to extend the current Simplified Value Added Tax (SVAT) scheme beyond April 2025.
In a letter addressed to President Anura Kumara Dissanayake, the association welcomed the proposal, stating that it views the approach as a clear testament of constructive policymaking by the authorities. 
“The removal of the current SVAT scheme would result in a significant cash flow burden to the exporters and other zero-related suppliers, given the delay in implementing a strong tax relying mechanism by the Inland Revenue Department for VAT repayments,” the association said.
“Introducing the SVAT scheme has been able to provide a great relief to our industry stakeholders and trade bodies all the while,” it added.
The government in 2023 announced the termination of the SVAT methodology, along with the removal of several VAT exemptions, as part of its efforts to boost exports by 1.2 percent of GDP. 
The termination was initially set to take effect from January 1, 2024, with plans to replace it with a more formal methodology for the VAT repayments.
However, the enforcement of the decision was postponed to April 1, 2025, following strong opposition from the exporters and business chambers across the country.
The industry stakeholders have long warned that removing the scheme would cripple the export sector, as it would immediately disrupt the cash flow in many downstream industries and supply mechanisms that would then lead to a ripple effect of financial challenges for the exporters.