Business
JAAF calls on GoSL to urgently reconsider SVAT abolition
With the countdown to the forthcoming abolition of the Simplified Value-Added Tax (SVAT) system ticking down to an end date of April 1, 2025, the apex body of the Sri Lankan apparel industry, the Joint Apparel Association Forum (JAAF) urged the government to urgently reconsider its decision in light of growing stresses on the industry, a press release said.
The release adds: “The apparel sector is currently grappling with significant challenges in the global market, which is already being reflected in reduced export figures. At such a time, the removal of SVAT without first establishing a viable and efficient refund mechanism is going to drastically disrupt cash flows for all exporters including the apparel industry, which makes up nearly half of the nation’s entire export portfolio. Failure to reconsider this policy will almost certainly exacerbate financial strain on the sector, and further erode Sri Lanka’s export competiveness as funds will inevitably be tied up in refund processes, even in the most efficient systems,” said Bandula Fernando, chairman, Sri Lanka Chamber of Garment Exporters – which represents the SME sector with JAAF.
‘While authorities have committed to “significantly speed up valid VAT refunds” the apparel industry has maintained its position that this commitment has not been met with no measurable improvements on time taken for refunds having been achieved as yet. According to Fernando, any decision to proceed with abolition of the SVAT scheme in the absence of any tangible progress on speeding up valid VAT refunds would be catastrophic, particularly for the SME sector.
“The SME sector is really struggling right now and if the removal of the SVAT system goes ahead this will be a major burden on the cash flows of the SME sector. Despite the law requiring for refunds to be made within 45 days, exporters have legitimate VAT refunds due as far back as 2010 and no interest is paid on these delayed refunds. In that time, the Sri Lankan rupee has lost 69% of its total value. Such inefficiencies will create insurmountable obstacles for SME apparel exporters, and severely erode cash flows even for larger players,” he noted.
‘Meanwhile, JAAF Secretary General, Yohan Lawrence stressed that JAAF and its members recognize and appreciate the government’s need to meet revenue targets as part of the IMF program However, he noted that the decision to remove the SVAT scheme had unfortunately been made on two incorrect assumptions, namely: that the current system creates revenue erosion and that the removal of SVAT would enhance the revenue collection for the state.
“This claim has not been substantiated in respect of the formal apparel sector where the SVAT system is used for the sourcing of intermediary goods for the manufacture of apparel. The industry has been on a journey of backward integration whereby supply of raw materials has moved away from being imported to being manufactured locally. Removal of the SVAT system will reverse this trend, leading to more imports,” Lawrence cautioned.
‘According to industry experts, the primary effect of abolishing SVAT would be increased cash flow between exporters and the IRD, and not increased revenue. Sri Lanka’s history with VAT refunds prior to SVAT was marked by significant delays, with refunds due for over 18 months, creating significant financial bottlenecks for exporters.
‘Historically, VAT refund systems have been prone to fraud, particularly in the non-export sector. The SVAT system effectively mitigates this risk by limiting the scope for abuse. Exporters, who utilize SVAT to purchase local inputs for conversion into export products, have minimal local sales, thus reducing potential misuse. Conversely, the likelihood of fraud is significantly higher in an inefficient payment and refund system compared to the voucher-based SVAT system.
‘Moreover, the reintroduction of a VAT refund system may compel apparel exporters to import raw materials rather than purchasing domestically. This shift would not only strain cash flows but also increase imports and reduce incentives for domestic value addition, negatively impacting the balance of trade.
‘Under SVAT, apparel exporters could purchase local raw materials without immediate cash outflows for VAT, promoting the use of domestically produced inputs. With the inefficient refund system, the incentive to buy local decreases. Such a scenario would eventually undermine the unique vertical integration benefits that Sri Lanka’s apparel industry offers, potentially threatening the sector’s viability and the jobs it supports.
“Reinstating a VAT refund system will demand substantial resources from the IRD for ongoing follow-ups and evaluations, leading to increased administrative costs and misallocation of precious resources. The additional burden on both the IRD and the industry is unnecessary and counterproductive,” Lawrence added.
Business
ADB working to strengthen Sri Lanka’s sustainable finance framework amid low-innovation capital market
The Asian Development Bank (ADB) reaffirmed its commitment to advancing Sri Lanka’s sustainable finance sector during the Serendipity Knowledge Programme on Sustainable Finance, emphasising the country’s untapped potential to leverage capital markets for green investments.
Delivering the closing remarks at the event held on March 19, ADB Sri Lanka Country Director Takafumi Kadono underscored the bank’s role as a “trusted partner” in the nation’s sustainable finance journey, citing collaborative efforts such as the development of Sri Lanka’s green bond framework with the Securities and Exchange Commission (SEC) and Colombo Stock Exchange (CSE).
“ADB is happy to have assisted the SEC and CSE in developing the green bond framework,” he stated, positioning the initiative as a milestone in diversifying financial instruments to attract foreign and local capital.
Kadono highlighted global precedents where sustainable finance flourished even in markets constrained by limited liquidity and product variety. “There is strong potential for sustainable finance using Sri Lanka’s capital market to attract funds,” he said, stressing that product innovation—such as green bonds—could catalyze growth while strengthening market depth. He pointed to the phased rollout of ESG (environmental, social, governance) disclosure standards aligned with IFRS, set to begin in 2025, as a critical step toward building investor confidence.
Sri Lanka’s existing frameworks, including the Central Bank’s 2019 Sustainable Finance Road Map and 2022 green taxonomy guidelines for banks and non-banking institutions, were praised by him as foundational achievements.
ADB Sri Lanka Country
Director Takafumi Kadono
However, Kadono emphasized the need for broader corporate compliance with disclosure norms, capacity-building, and policies that incentivize ESG innovation. “Today’s discussions emphasised raising awareness and fostering an ecosystem where ESG goals can thrive,” he noted, linking these efforts to attracting global investor attention.
Beyond green bonds, ADB’s support spans banking reforms, SME finance, and the establishment of the National Credit Guarantee Institution—initiatives aimed at stabilizing Sri Lanka’s financial ecosystem.
Looking ahead, Kadono revealed plans to prioritize digital finance and fintech to accelerate financial inclusion, stating, “ADB will elevate its support to enhance digital finance in Sri Lanka.”
Kadono lauded the Sri Lankan government’s vision for greening the financial system but urged sustained collaboration to implement reforms. “The discussions today are just the beginning—success will require decisive leadership and resilience,” he concluded, reiterating ADB’s long-term commitment to the country’s sustainable finance goals.
The event, attended by policymakers, financial experts, and global stakeholders, spotlighted Sri Lanka’s incremental progress and the strategic role of capital markets in aligning economic growth with climate resilience. With ADB’s backing, the nation now faces the challenge of translating dialogue into actionable frameworks that unlock sustainable investment.
By Sanath Nanayakkare
The Ceylon Chamber of Commerce, Sri Lanka’s premier business chamber, proudly marks its 186th anniversary today (25th March)
Reflecting on this milestone, the Chairman of the Ceylon Chamber, Duminda Hulangamuwa, stated, ‘for 186 years, the Ceylon Chamber has remained committed to putting “Sri Lanka First” in all its efforts. Whether through policy advocacy, trade facilitation, or fostering market access, we reaffirm our dedication to advancing business interests while driving national growth and prosperity.’
Guided by its core pillars—Policy Advocacy, Engagement, and Market Access—the Ceylon Chamber continues to champion economic resilience, international trade, and sustainable business practices. Over the past year, it actively engaged with key stakeholders to support post-crisis economic recovery, attract investment, and facilitate trade. Through high-level business delegations, forums, and partnerships with global trade bodies, the Ceylon Chamber has expanded opportunities for Sri Lankan enterprises, fostering stronger economic ties worldwide.
Looking ahead, the Ceylon Chamber remains focused on building stronger businesses, creating sustainable opportunities, and ensuring that Sri Lanka remains a key player in the global marketplace.
Business
ALFT empowers Sri Lanka’s leading consumer brands with industry-first packaging masterclass
ALFT Packaging, Sri Lanka’s pioneer in Flexible packaging, successfully concluded an exclusive three-day masterclass titled ‘Unboxing the Future of Flexible Packaging’ in partnership with Miraclon, a frontrunner in the global shift to flexography. The industry-first event, held on 3-5 March in Colombo, connected Sri Lanka’s leading consumer goods manufacturers and brand owners to explore revolutionary approaches to packaging design, technology, and sustainability.
The masterclass featured renowned packaging expert speakers Steve Smith, who has transformed the print and packaging industry across Asia Pacific with over 40 years of expertise in Modern Flexo technologies, and Hersh Lulla, who provided valuable insights on innovation and market trends.
The event attracted an impressive lineup of Sri Lanka’s most prominent companies, including Nestlé Sri Lanka, Unilever Sri Lanka, CBL Group, Maliban Group, Prima Ceylon, Hettigoda Industries, Keells Foods, Hayleys PLC, Ceylon Chocolates, Milco, and other industry leaders. The diverse attendance covered the food and beverage, personal care, and consumer goods sectors, reflecting the universal importance of innovative packaging solutions across industries.
Lakshman De Fonseka, Chairman, ALFT Packaging said, “We are committed to driving the evolution of flexible packaging excellence in Sri Lanka. The masterclass represents our dedication to bringing world-class expertise and cutting-edge technologies to local brands, enabling them to compete confidently on the global stage. The enthusiastic participation from Sri Lanka’s most prestigious brands confirms that packaging innovation has become a strategic imperative for business growth and consumer engagement.”
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