Sri Lanka’s apparel sector calls for digital VAT refund overhaul

Welcoming the latest budget in Sri Lanka, the Joint Apparel Association Forum (JAAF) recently expressed serious concern over the potential impact of a premature removal of the simplified value-added tax (SVAT) without a clear, well-tested alternative.

Ensuring a smooth and transparent transition from SVAT is crucial to maintaining the apparel industry’s competitiveness and sustaining investor confidence, JAAF said.

Timely VAT refunds and a robust mechanism to prevent delays will be key to safeguarding liquidity for exporters, it stressed.

The Forum was among those who had advocated a digitally-driven VAT refund solution with minimal human intervention, ensuring efficiency and transparency.

“A poorly managed transition could create cash flow constraints for exporters, disrupt operations, and damage Sri Lanka’s reputation as a stable sourcing destination, especially at a time when global brands prioritise supply chain reliability,” it said in a statement.

The apparel sector contributes over 40 per cent to total merchandise exports of the country.

JAAF requested the government to work closely with industry stakeholders to ensure a seamless VAT transition, incorporating efficient digital refund processing mechanisms to prevent disruptions.

The proposed private sector wage increases should be coupled with the removal of the two Budgetary Relief Allowance Acts so that the National Minimum Wage becomes a consolidated value, including all allowances, it suggested.

“Clarity on tax administration, timely execution of trade facilitation measures, and continued focus on export competitiveness will be critical to meet the ambitious export targets,” it was quoted as saying by domestic media reports.

Source: Fibre2Fashion
–Agencies