Discontinuation of SVAT system: What businesses need to know

Monday, 15 September 2025 03:00 - - {{hitsCtrl.values.hits}}

The Simplified VAT (SVAT) system is set to be discontinued effective 1 October. This decision will significantly impact many businesses, particularly exporters who rely on this system for upfront VAT refunds.

EY Sri Lanka and Maldives Partner – Head of Tax Sulaiman Nishtar commented, “The discontinuation of the SVAT system by the Inland Revenue Department represents a significant change that businesses will need to prepare for. This transition may lead to some uncertainty, and it is important for businesses to seek the necessary information and proper guidance during this period.”

EY Sri Lanka Principal – Tax Shakthivel Velauthapillai said, “Businesses need to be informed about the implications of this discontinuation. It is essential for them to understand how this change will affect their operations and compliance requirements.”

Key action points for businesses

To ensure a smooth transition, businesses should take note of the following key action points:

1. Suspended tax invoices: Suspended tax invoices cannot be issued for any supplies made to Registered Identified Purchases (RIPs) after 30 September.

2. SVAT Schedules 4, 5, and 7:

Registered Identified Suppliers (RIS) to submit SVAT Schedule 4, by 15 October.
RIPs are required to approve SVAT Schedule 4 by 20 October. If rejected by RIP (with valid reasons), resubmit by 31 October.
Submit SVAT Schedules 5 and 7 by 31 October.

3. SVAT credit vouchers: RIS should receive credit vouchers for suspended purchases made until 30 September. These credit vouchers must be approved by RIPs by 20 October.

4. Declaration of suspended supplies in VAT returns: Suspended supplies cannot be made after 30 September, and there should not be any SVAT-related reporting in the VAT Return after this date. Taxable supplies from 1 October, should be reported in cages ‘A’ and ‘O’ under the standard VAT system.

5. Adjustments via tax credit/debit note: Tax credit/debit note adjustments for transactions reported under the SVAT scheme will not be accommodated in subsequent VAT returns filed under the standard VAT system. Any adjustments to amounts reported under the SVAT system prior to 1 October, should be made by amending the VAT Return for such periods within six months from the original invoice date.

The discontinuation of the SVAT system marks a significant development for businesses. It is crucial for them to prepare for this change and seek the necessary resources and information.

EY Sri Lanka Partner – Tax Shehani Paranavitane said, “As we approach the discontinuation date, businesses should take proactive steps to understand the implications and adjust their operations accordingly. Staying informed and engaged will be key to managing this transition successfully.”