JAAF welcomes Budget 2025, calls for caution on removal of SVAT

The Joint Apparel Association Forum (JAAF) has expressed cautious optimism about Sri Lanka’s 2025 budget, commending its emphasis on export-driven growth, investment facilitation, and economic stabilization. The budget’s focus on expanding Free Trade Agreements (FTAs), modernizing trade infrastructure (e.g., National Single Window, e-cargo tracking, Customs reforms), and legislative measures like the Investment Protection Bill aligns with the apparel sector’s goals of securing market access and improving ease of doing business. JAAF also welcomed plans for a National Export Development Plan and a digital trade architecture to streamline processes, underscoring the industry’s role as Sri Lanka’s largest merchandise exporter (contributing over 40% of exports).

However, JAAF raised significant concerns about the proposed phase-out of the Simplified Value Added Tax (SVAT) scheme, urging the government to ensure a risk-based refund system is fully operational before discontinuing SVAT. The apparel sector relies on SVAT for predictable cash flow, and a premature transition to an untested mechanism could disrupt liquidity, strain exporter operations, and harm Sri Lanka’s reputation as a reliable sourcing hub. JAAF emphasized that global buyers prioritize supply chain stability, and any delays or inefficiencies in VAT refunds could deter investment and erode competitiveness.

The association reiterated its earlier recommendation for a digitally driven VAT refund process with minimal human intervention to ensure transparency and efficiency. It stressed that a poorly managed transition risks destabilizing an industry critical to Sri Lanka’s economic recovery, particularly amid ongoing macroeconomic challenges. JAAF called for close collaboration with the government to design a robust VAT framework, safeguard exporter liquidity, and maintain investor confidence. While supportive of broader reforms, the sector urged caution, emphasizing that policy continuity and careful implementation are vital to sustaining growth in Sri Lanka’s apparel industry—a cornerstone of the nation’s export economy.