SRI LANKA UPDATE | 08 – 14 SEPTEMBER 2023
Government defers controversial Simplified Value-Added Tax (SVAT) – The Cabinet of Ministers accepted the modification of the relevant provisions’ implementation date to 1 April 2025 in light of exporters’ vocal opposition to the elimination of the SVAT scheme. Earlier, it was planned for the proposed amendments, which include the SVAT repeal, to go into effect on January 1, 2024. Strong arguments from a number of stakeholders, however, emphasized the potential for financially disruptive effects, notably for exporters now registered under the SVAT system. They emphasized that before the SVAT system is entirely eliminated, a strong value-added tax recovery mechanism must be solidly built. President Ranil Wickremesinghe, who serves as the Minister of Finance, Economic Stabilization, and National Policies, led the Cabinet of Ministers in approving a gradual implementation of the new tax changes in response to these disputes.
Sri Lanka propels green initiative with zero Custom tariffs on electric vehicles – The Cabinet authorized a zero customs levy on the CIF value for imported electric cars in an effort to promote local manufacture of electric vehicles (EVs) and advance sustainable mobility. The decision expands its application to new partially constructed Semi-Knocked-Down (SKD) sets with an engine capacity of up to 3000 CC and electric two-wheelers with a power grade of up to 500 kW. These kits are intended for use in plug-in hybrid car construction. Investors must make a minimum USD 50 million investment in the production of electric or plug-in hybrid automobiles in order to qualify for this incentive.
Government signals Domestic Debt Optimization (DDO) completion with 37 per cent acceptance of T-Bonds – Despite protests from trade unions and think tanks, the Government announced that the acceptance of Treasury Bonds had been successful, signalling the end of DDO. The Government reported that bids were received for 37 per cent of the outstanding principal amount of all Eligible Bonds. This represents LKR 3.2 trillion out of the LKR 8.7 trillion in T-Bonds. As of the end of June 2023, valid Offers had been accepted for almost 84 per cent of the total outstanding principal amount of Eligible Bonds among the Superannuation Funds.
Politics & Policy:
Indian CEOs to promote investments into Sri Lanka – Prime Minister Dinesh Gunawardena received an assurance from members of the Sri Lanka India Society, which includes Indian CEOs, that further Indian investments will be encouraged as the moment is right to increase cooperation in a number of industries. When a team from the Sri Lanka India Society made the Premier a courtesy visit to explore how to strengthen bilateral economic relations, particularly trade and investment, they expressed this. The Prime Minister praised the Indian CEOS for their efforts to boost private sector Indian investments while highlighting the expansion of Government-to-Government development cooperation. The industries of agriculture, tourism, information technology, renewable energy, and education have a lot of promise for investment, according to Kishore Reddy, president of the Sri Lanka India Society and managing director of Platinum Realty Investments.
Parliament passes EPF-linked Bill midst strong opposition – The Minister of Labour and foreign employment, announced an extension of the deadline for submitting ideas for the recently proposed employment legislation. Trade unions that haven’t yet reacted to the calls will have until the first week of October to submit their recommendations and proposals about the new law, according to the Minister. The Minister further emphasized the need for trade unions to respond quickly and warned against any attempts to prolong the law’s implementation by doing so. The Cabinet is anticipated to approve the concept paper for the new Employment Act in about two weeks, he said, noting that several institutions and trade unions have already offered their opinions on the subject.
Chinese industrialists seek partnership for major fisheries investment in Sri Lanka – In order to discuss prospective investments in Sri Lanka’s developing fisheries industry, a Chinese team headed by Yushu Huang, Chairman of the Fujian Province Aquatic Products Wholesale Industry Association, visited Prime Minister Dinesh Gunawardena. He stated a strong desire to build a cutting-edge fish processing plant near coastal harbours that would be used to process and export premium fish products. During the meeting, Huang stressed the association’s position as China’s top exporter of fish production. Secretary Huang Jincheng gave additional details about the ambitious project and assured the use of cutting-edge technology, including the deployment of contemporary multi-day fishing vessels for sustainable fishing practices, cutting-edge fish processing techniques, and adherence to the highest industry standards.
New push to boost Lankan exports to Australia – The Sri Lanka and Australia Chamber of Commerce introduced a new program on Tuesday under the name “A Journey of Exploration” in an effort to increase exports to the country up to AUD 1.5 billion and even higher. A prominent trade delegation from Australia will be hosted by the Chamber and the Export Development Board (SLEDB) during the next weeks in what is intended to be an enthralling fusion of exploration, cultural immersion, and economic cooperation between the two nations. Representatives from the Aboriginal Economic Development Group and other well-known corporations will be part of the Australian delegation.
Apparel industry welcomes SVAT deferment – The recent Cabinet decision for the postponement of the Simplified Value-Added Tax (SVAT) system, scheduled to go into effect on 1 April 2025, was welcomed by the Joint Apparel Association Forum (JAAF). JAAF stated that they are especially grateful for the decision to wait until a solid tax repaying system is in place before removing SVAT. The association stated in a statement that the decision reflects the committed efforts of Government stakeholders to defend the export business, for which JAAF is grateful. The deferral, according to the statement, comes at a crucial moment for exporters who have been dealing with decreased shipments and the potential of a disruption in cash flow if SVAT were abolished without a cashless refund mechanism in place.
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This Advisory, written for our partners interested in developments in Sri Lanka against the backdrop of the current crisis, is an update on the one issued last week. This document summaries developments covering significant political and economic events. The Advisory includes economic, political, social and governance perspectives. It draws on news reports, analyses, Government announcements and documents, and from other sources that we may be in contact with or have access to.
This Advisory was prepared by the Strategic Communications Unit of Adfactors PR Lanka. For inquiries, contact email@example.com