Sri Lanka’s Finance Minister Mangala Samaraweera, considering the requests made by the stakeholders in the fabric industry, has signed the Gazette notification on yesterday (17^th September 2018) to reduce the Value Added Tax (VAT) on imported fabric to 5%. Earlier the fabric was subject to CESS of Rs. 100 per kilogram at the time of imports, whilst the Budget 2018 had proposed to impose a 15% VAT on goods, the Value Added Tax Act No. 14 of 2002 was amended accordingly, and the new VAT scheme came into effect from 16 August. As a result fabric was also subject to this 15% VAT.

However the importers, traders and industrialists engaged in using fabric as raw material for making readymade garments had appealed to the Minister of Finance to provide them some relief as small-scale traders and industrialists who are not covered under VAT Act suffer adverse effects. Accordingly the Minister had made this decision to amend the VAT Act further to reduce the VAT on imported fabric to 5% considering the possibility of giving a helping hand to proposed small-scale industrialists under the enterprise Sri Lanka scheme.

- Reporting by Devendra Francis