Planters’ Association commends postponement of SVAT abolition
View(s):The Planters’ Association of Ceylon (PA) has commended the Government for its decision to postpone the abolition of the Simplified Value Added Tax (SVAT) system to April 1, 2025. This decision, initially planned for January 1, 2024, followed strong opposition from a broad coalition of exporters and business chambers.
While the postponement provides some relief, the PA in a media statement urged the Government to further ensure that the SVAT system would be retained until a proper and effective alternative can be implemented in consultation with all stakeholders.
“Such a system must ensure the Government does not face challenges with revenue while also protecting the cash flows of Sri Lankan exporters, who are already facing significant challenges in an increasingly volatile global economic environment,” Planters’ Association of Ceylon, Secretary General, Lalith Obeyesekere stated.
The SVAT system, which has been a critical support mechanism for the industry since its implementation in 2011, remains vital for the survival of both Regional Plantation Companies (RPCs) and smallholder tea farmers.
Stakeholders remain deeply concerned that the eventual removal of SVAT without a robust replacement could lead to significant income losses for all exporters – particularly tea and rubber smallholders – and disrupt the entire tea value chain. Historically, the Sri Lankan tea industry saw robust growth until 2014, with exports surpassing 300 million kg and generating earnings of approximately US$1.5 billion.
“In 2018, the Government at that time set an optimistic target of doubling national tea production by 2025. But this trajectory shifted dramatically following the ban on Glyphosate in 2015, and a complete ban on fertiliser and agrochemicals in 2021. Both decisions severely impacted crop yields. By 2023, tea production had plummeted to around 223 million kilos, with export earnings dropping to about $1.3 billion. Approximately 480,000 smallholders in Sri Lanka depend on tea for their livelihoods,” the PA stated.
Smallholders receive approximately 68 per cent of the total price that the tea fetches at the auction for their green leaf. However, with average earnings around Rs. 23,000 per month for those cultivating an average of 0.5 acres, the financial strain is palpable. The anticipated loss due to the eventual removal of SVAT could amount to an estimated Rs. 24 billion annually for smallholders alone, representing 18 per cent directly borne by smallholder families.
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