Tea Exporters’ Association welcomes deferment of SVAT removal

Tea Exporters’ Association (TEA) said yesterday it was relieved over the Government decision to defer the removal of SVAT until April 2025.

In a statement TEA thanked President Ranil Wickremesinghe, the Sectoral Oversight Committees of Parliament, the Finance Ministry and other relevant organisations for understanding the position of all exporters and the possible adverse impact that may have fallen on the country’s export sector if SVAT was removed without introducing an efficient mechanism for settlement of VAT refunds. 

TEA was concerned over the proposed removal of SVAT as there is no output VAT to set off against the input VAT and some part of the VAT component may have to be factored into the price of export products affecting competitiveness of Ceylon Tea. It could have also restricted exporters’ ability to pay better prices at the tea auction due to cash flow issues.

TEA believes the recommendations made by all export sector associations would be carefully considered by the Inland Revenue Department and the removal of SVAT would be introduced gradually even from April 2025 to cushion any sudden adverse impact on the export industry.  We request the IRD to clear all backlogs in refunds and VAT deferment and introduce a robust mechanism for settlement of VAT refunds to the exporters within 2-3 weeks to enable the removal of the simplified VAT system which has helped the exporters to be competitive in the global tea market.

It said the proposed removal of exemption of VAT for Tea and green leaf recently announced is also of concern to the all-important Tea sector. Our request is to consider the natural produce of Tea of which peoples’ cost is the biggest component, be kept exempt from VAT so that this key net foreign exchange earner is in an equitable position along with rice and paddy that continue to enjoy VAT exemption.

“We also request the IRD to have consultations with industry stakeholders to come up with a practical VAT and refund regime as decisions such as bringing tea smallholder farmers, factory owners and producers under the VAT net could have adverse impact on the entire sector and the forex earnings,” TEA statement added.