Thursday Oct 02, 2025
Thursday Oct 02, 2025
Monday, 29 September 2025 00:26 - - {{hitsCtrl.values.hits}}
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| CRTA Chairman Harin de Silva |
The Colombo Rubber Traders’ Association (CRTA) yesterday issued an urgent warning on the severe and far-reaching consequences of the Government’s decision to abolish the Simplified Value Added Tax (SVAT) scheme effective 1 October.
Echoing the serious concerns raised by other leading export chambers, the CRTA warned that removing the SVAT without a tested and operational refund mechanism will trigger widespread financial distress across Sri Lanka’s natural rubber industry, threatening smallholder livelihoods, Small and Medium Enterprise (SME) viability, export competitiveness, and foreign exchange inflows vital to the nation’s recovery.
“Removing the SVAT in the absence of a functioning refund system risks plunging the entire value chain into chaos. The Government must act responsibly and decisively to prevent irreversible damage,” CRTA Chairman Harin de Silva said.
Sri Lanka’s natural rubber sector supports tens of thousands of smallholder farmers. The removal of the SVAT will force manufacturers to pay billions in VAT upfront, causing delays in purchasing raw rubber and exerting downward pressure on farm gate prices.
The CRTA said that SMEs within the rubber supply chain who provide essential raw materials, processing, and services will be disproportionately affected. With limited access to financing, these businesses cannot absorb the burden of upfront VAT payments, putting many on the brink of collapse.
Such a collapse would reverse decades of progress in building local value chains, destroy jobs, and erode the industrial backbone of Sri Lanka’s rubber economy.
Exporters, already strained by high operational costs and volatile global demand, are now facing crippling liquidity risks due to uncertainty over VAT refund timelines. Without the SVAT, these companies will be forced to tie up working capital or resort to expensive borrowing, further squeezing already thin margins.
“Many companies simply cannot afford to have their cash blocked for 45 days or more,” de Silva said. “If this happens, they will be forced to reduce operations, delay payments, or even shift to importing raw materials—putting local suppliers at risk and discouraging foreign investment.”
While the Inland Revenue Department (IRD) has promised VAT refunds within 45 days, the CRTA highlights a complete lack of confidence in the readiness of the system.
The proposed risk-based digital refund mechanism is still in its infancy, with crucial components such as e-invoicing yet to be fully implemented.
In alignment with other major export chambers, the CRTA calls on the Government to:
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*Defer or phase out the SVAT only after a fully operational and proven digital refund mechanism is in place.
*Protect smallholder farmers and rural communities whose incomes depend on uninterrupted market access.
*Support SMEs from cash flow shocks that could lead to widespread closures.
*Safeguard Sri Lanka’s export economy and preserve urgently needed foreign currency inflows.
“Rubber exports are not just numbers; they represent rural livelihoods, domestic industry, and foreign exchange,” de Silva added.
