The Free Trade Zone Manufacturers’ Association (FTZMA), the National Chamber of Commerce of Sri Lanka (NCCSL) and the Sri Lanka Chamber of Small and Medium Industries have filed a writ application before the Court of Appeal challenging the decision by the Inland Revenue Department (IRD) to commence collecting Value Added Tax (VAT) from today (October 1) without first operationalising the legally mandated automated refund mechanism.

The Petitioners—representing exporters, deemed exporters, sub-contractors to exporters, service providers in the export supply chain, SMEs, and the broader business community—state that collecting VAT from export-related businesses without a proper functioning refund system, and without publishing the conditions of the proposed risk-based refund scheme in the Gazette, is unlawful, unreasonable, and a violation of constitutional rights.

According to the Petitioners, the Government abolished the Simplified Value Added Tax (SVAT) scheme earlier this year, after it had been postponed by the previous administration at the request of the export community. That abolition was accompanied by a statutory requirement that a new automated, risk-based VAT refund scheme be in place from 1 October 2025. The Petitioners state that to date, no such system has been implemented, nor have the selection criteria for the refund scheme’s Green, Amber, and Red channels been published.