History of Ceylon Tea

• Says going ahead with SVAT could restrict exporters’ ability to pay better prices at the tea auction
• Requests IRD to clear all the back logs in refunds and VAT deferment
• Stresses need for consultations with industry stakeholders to come up with a practical VAT and refund regime

 Sri Lanka’s tea sector yesterday joined the bandwagon in welcoming the decision made by the government to defer the SVAT removal. In a statement to the media yesterday, the Tea Exporters Association (TEA) was relieved over the government decision to defer the removal of SVAT until April 2025. The association commended t h e P r e s i d e n t , S e c t o r a l Oversight Committees of Parliament, Ministry of Finance and other relevant organisations for understanding the position of all exporters and possible adverse impact that may have fallen on the country’s export sector if the SVAT was removed without introducing any efficient mechanism for settlement of VAT refunds.

“TEA was very much 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 in to the price of export products affecting the competitiveness of Ceylon Tea.

It may have also restricted exporters’ ability to pay better prices at the tea auction due to cash flaw issues,” the Association said. T E A b e l i e v e s t h e recommendations made by all export sector associations would be carefully considered by Inland Revenue Department and removal of SVAT will be introduced gradually even from April 2025 to cushion out any sudden adverse impact on the export industry. However, it requested the IRD to clear all the back logs 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 market for tea.

Further, it noted that 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 which continue to enjoy the VAT exemption,” TEA said.

It also requested the IRD to have consultations with industry stakeholders to come up with a practical VAT and refund regime so that 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.