MSME Federation criticises Budget 2026 over VAT threshold reduction, lack of support

Monday, 10 November 2025 04:20 - - {{hitsCtrl.values.hits}}

Ceylon Federation of MSME President Mahendra Perera

Ceylon Federation of MSME President Mahendra Perera stresses many MSMEs continue to face liquidity challenges
Plans to highlight concerns to authorities to establish practical mechanism that enables genuinely affected MSMEs
Warns VAT threshold cut to Rs. 36 m from April 2026 will drag more small retailers into tax net
Says 18% VAT burden will ultimately fall on consumers, worsening cost-of-living pressures

The Ceylon Federation of MSME President Mahendra Perera yesterday criticised the 2026 Budget for failing to provide relief to struggling micro, small and medium enterprises (MSMEs), and warning that the reduction of the VAT threshold and lack of credit access could further strain both enterprises and consumers.

Perera said while the Government had introduced several new loan schemes for MSMEs, there was no meaningful support for businesses that have suffered losses over the past five years.

“The issue is that there’s no relief for the affected businesses and no mechanism to obtain new loans for those already in non-performing loan (NPL) status,” he told the Daily FT.

He stressed that many MSMEs continue to face liquidity challenges.

Perera said that the Federation plans to highlight these concerns through the media and at Ministry level in the coming days, urging authorities to establish a practical mechanism that enables genuinely affected MSMEs to regain access to capital.

He also raised concern over the Government’s decision to reduce the VAT registration threshold from Rs. 60 million to Rs. 36 million, effective April 2026, warning that it would push more small retailers into the tax net and pass an 18% VAT burden on to end consumers.

“This will be another major blow to people already struggling with day-to-day difficulties,” Perera cautioned.