Proposed SVAT repeal: Govt. to tread cautiously

By Rathindra Kuruwita

The Cabinet of Ministers on Monday approved a proposal by the President in his capacity as the Minister of Finance, Economic Stabilization and National Policies to postpone the repeal of simplified value-added tax (SVAT) to 01 April 2025 once the Bill is taken up for discussion at the committee stage in Parliament.

Cabinet spokesman Bandula Gunawardena told reporters on Tuesday that in June the Cabinet had approved a proposal by President Ranil Wickremesinghe to draft a Bill to cancel the existing SVAT methodology from 01 January, 2024, and to remove a large number of VAT exemptions.

However, a number of stakeholders had pointed that there would be serious financial repercussions, especially for exporters, if SVAT was repealed without a strong value-added tax repayment system.

Thus, it had become clear that SVAT had to be repealed gradually and a strong tax repaying mechanism had to be put in place in the meantime, Gunawardena said, adding that Sri Lanka must introduce two major revisions to the Value Added Tax (VAT) as per the agreement with the International Monetary Fund.

Sri Lanka had a number of goods and services exempted from VAT and one IMF condition was that most of these exemptions be removed, he said.