Category: Daily Financial Times

The Cabinet on Monday approved the establishment of a special committee to address illegal land acquisitions, unauthorised coastal developments and longstanding land administration issues in the Eastern Province, Cabinet Spokesperson and Minister Dr. Nalinda Jayatissa said yesterday.

The decision follows concerns over what the Government described as a series of political, economic and administrative problems in the province arising from the misuse of state power, political patronage, illegal land grabbing and unauthorised construction activities along the eastern coastline.

Announcing Cabinet decisions, Dr. Jayatissa said the proposal had been submitted by President Anura Kumara Dissanayake with the objective of finding permanent solutions to land-related disputes, strengthening institutional coordination and enabling legal action against unlawful activities.

Accordingly, Cabinet approved the appointment of a committee titled ‘Protecting Eastern Province Lands’ under the chairmanship of former Southern Province Land Commissioner and current Southern Province Local Government Commissioner Senaka Palliyaguruge, with representatives from relevant state institutions.

The Government said illegal land acquisitions and unauthorised coastal developments have contributed to environmental degradation and accelerated soil erosion along large sections of the eastern coastline.

Cabinet also approved the establishment of a special unit headed by a Deputy Inspector General of Police and the granting of full powers to the security forces to prevent unauthorised land acquisitions and land reclamation activities allegedly carried out using political influence.

As part of the initiative, the Government will also take back lands allocated by the Sri Lanka Mahaweli Authority more than five years ago where no development projects have been implemented.

Those lands will subsequently be handed over to Divisional Secretaries under a formal program to support local development activities.

The Cabinet paper further noted that, despite 16 years having passed since the end of the civil war, the absence of a comprehensive resettlement program for displaced persons and inconsistencies in administrative structures have continued to affect development activities in the province and have implications for national security.

Among the other measures approved was the preparation of a formal plan to promote tourism along the eastern coastline while safeguarding coastal ecosystems.

Cabinet also approved the formulation of a mechanism to ensure that Government officials enforce laws impartially and transparently in relation to hotel operations and tourism-related developments along the eastern coast.

The Government said the measures are intended to address longstanding governance and land management issues in the Eastern Province while supporting sustainable development and environmental protection.

Abans Group and David Peiris Group ‘A’ registered wins to take the top two spots of Group ‘A’ of Tier ‘A’ of the CDB sponsored MCA T10 cricket tournament matches played on Saturday.

The game between Sanija Fertiliser and Abans Group was abandoned without a toss due to wet ground conditions at the Mercantile Cricket Association ground.

Half centuries by Lahiru Samarakone and Tharinda Nirmal helped the David Peiris team post 172/2 in their 10 overs after which their bowlers bowled out Senija Fertilisers for 113 runs with a ball to spare. Lakshan de Silva was the pick of the bowlers with a three wicket haul while Lahiru Samarakoon and Tharinda Nirmal captured two wickets each.

Twenty wickets fell in the final game of the day as Abans powered by a half ton by Savindu Uthsara defeated David Peiris ‘A’ by 32 runs.

Scores:

David Peiris Group ‘A’ 172/2 in 10 overs (Lahiru Samarakoon 61, Santhush Gunathilake 39, Tharinda Nirmal 66*, Umeshka Morais 1-28, Hivin Kenula 1-32)

Senija Fertiliser 113/10 in 9.5 overs (Ravishan de Silva 44, Malsha Tharupathi 27, Kanchana de Livera 14, Isuru Udana 17, Santhush Gunathilake 1-21, Asitha Wanninayake 1-15, Lahiru Samarakoon 2-27, Lakshan de Silva 3-10, Tharinda Nirmal 2-11)

Abans 147/4 in 10 overs (Kavida Ishwara 25, Duranka Silva 26, Savindu Uthsara 58, Shalith Fernando 32*, Lahiru Samarakoon 1-14, Dilanka Auwardt 2-22, Asitha Wanninayake 1-18)

David Peiris Group ‘A’ 115/5 in 10 overs (Lahiru Samarakoon 16, Santhush gunathilake 12, Asitha Wanninayake 15, Ron Chandraguptha 42*, Mihiranga Fernando 1-24, Kavinda Ishwara 1-16, Romesh Suranga 2-19, Sudara Dakshina 1-24)

Sri Lanka’s first National Guidelines on Business and Human Rights were launched last week by the Human Rights Commission of Sri Lanka (HRCSL) with co-funding support provided by the European Union and supported by the Max Planck Foundation for International Peace and the Rule of Law (MPF) in Germany and Centre for a Smart Future (CSF) in Sri Lanka.

These guidelines mark an important step towards strengthening responsible business conduct and integrating human rights considerations into business practices across the country.

Centre for a Smart Future Director and HRCSL Sub-Committee on Business and Human Rights member Iromi Perera said: ‘The question before us is how we can build on this foundation and ensure that the values reflected in these guidelines become an accepted operating norm within the private sector, rather than a source of contention or conflict.’

She further highlighted that the guidelines represent the beginning of an important journey and reflect a collective commitment by diverse stakeholders to address issues at the intersection of business and human rights.

The launch forms part of the broader Just Business: Promoting the Adoption of Business and Human Rights in Sri Lanka and the Maldives project, through which MPF and CSF have been supporting the HRCSL’s efforts to strengthen awareness, dialogue, and institutional capacity on business and human rights.

Representatives of the Max Planck Foundation noted that the guidelines were the result of a collaborative process driven by the HRCSL and supported through international partnership: ‘these guidelines are a starting point rather than an endpoint. Their real value will be measured by the conversations, practices, and partnerships they continue to inspire long after the project itself has concluded.’

The launch also featured a panel discussion reflecting on the guidelines and Sri Lanka’s broader business and human rights agenda. Panellists from the HRCSL, civil society, the private sector, and international organisations discussed opportunities to strengthen responsible business practices, promote meaningful stakeholder engagement, and support the implementation of the guidelines across sectors.

As global expectations around environmental, social, and governance standards continue to evolve, the guidelines are expected to serve as a valuable resource for the private sector, businesses, State-owned enterprises, policymakers, regulators, and civil society organisations seeking to advance sustainable and rights-respecting economic development in Sri Lanka. The Guidelines are available in Sinhala, Tamil and English languages and can be downloaded from the HRCSL website – https://www.hrcsl.lk/documentation/guidelines-and-directives/

The Inland Revenue Department (IRD) has announced a broad package of tax reforms following the enactment of the Inland Revenue (Amendment) Act, No. 11 of 2026, introducing changes affecting individuals, businesses, professionals, investors and financial institutions.

In a special notice issued after the amendment was certified on 3 June, the Commissioner General of Inland Revenue said gains arising from the sale of personal motor vehicles will no longer be treated as taxable ‘other income’. The exemption applies retrospectively from 1 April 2024 and covers vehicles that are neither trading stock nor depreciable business assets.

The amendments also strengthen measures aimed at reducing large cash transactions. Payments of Rs. 500,000 or more made in cash or through non-approved methods will not qualify as deductible expenses or be included in the tax cost of an asset. Approved payment methods include account payee cheques, bank drafts, credit and debit cards, electronic bank transfers and direct cash deposits into the payee’s bank account.

The legislation expands tax relief relating to donations and gifts made to the Government and State universities. Donations made to Government-established funds will now be eligible for carry-forward treatment where they cannot be fully utilised during the relevant year of assessment.

The Act also clarifies the tax treatment of life insurance proceeds, providing that amounts received by policyholders or beneficiaries upon death, maturity or surrender of policies will generally be excluded from assessable income, subject to specified exceptions.

New compliance requirements have been introduced for unit trusts and mutual funds, which must issue annual tax certificates to unit holders. A unit trust or mutual fund that fails to comply with the requirement will be treated as a company for tax purposes.

The amendments introduce changes to tax residency provisions. Individuals employed overseas for at least one year under contracts with unrelated foreign employers will not be regarded as Sri Lankan tax residents during the contract period. Investor Category Residence Visa holders will also be excluded from tax residency status.

From 3 June 2026, the scope of the five percent withholding tax on service fees paid to resident individuals has been expanded to cover payments exceeding Rs. 100,000 per month to a wider range of professionals. The category includes IT specialists, social media specialists, translators, writers, photographers, videographers, coaches, personal trainers, artists, musicians, dentists, veterinarians, beauticians and event organisers.

In a move aimed at simplifying tax administration, the requirement to submit a Statement of Estimated Tax (SET) has been abolished. Quarterly income tax instalments will instead be determined based on the previous year’s tax liability.

The IRD has also granted relief to certain salaried employees. Individuals whose only income consists of employment income fully subject to Advance Personal Income Tax (APIT), and who have no additional tax liability, will no longer be required to maintain an income tax file or submit annual income tax returns. The concession also extends to employees earning annual interest income not exceeding Rs. 5,000.

The amendments expand the use of the Taxpayer Identification Number (TIN) across a range of transactions, including opening bank accounts, obtaining credit cards, registering businesses, motor vehicles and land, renewing vehicle licences, obtaining building approvals and transferring shares in Sri Lankan companies. The requirements will take effect once verification procedures are issued by the Commissioner General.

The legislation also strengthens enforcement powers available to the IRD. Failure to register, file returns, submit withholding tax statements or comply with notices issued by the Department may result in prosecution, with penalties of up to Rs. 400,000, imprisonment of up to six months, or both.

Capital gains tax rates have also been revised with effect from 3 June 2026. Individuals and partnerships will be subject to a 15% tax rate, while trusts, unit trusts, mutual funds and non-governmental organisations will be taxed at 30%.

Meanwhile, taxpayers with outstanding liabilities have been granted an interest waiver covering late-payment interest up to the 2024/25 year of assessment, provided the principal tax is paid in full by 2 December 2026.

The IRD urged taxpayers to familiarise themselves with the new provisions and ensure timely compliance with the amended law.

The Association of Professional Bankers of Sri Lanka (APB) inducted 30 Bank Coordinators representing 29 banks at its 2026 Bank Coordinators’ Induction Program held at the Kingsbury Hotel, Colombo recently.

The event was attended by APB President Dilshan Perera, members of the APB Council, the Advisory Committee, the Fund Management Committee and past presidents, signalling the association’s focus on strengthening professional engagement across the banking sector.

In his address, Perera highlighted APB’s role in advancing banking professionalism in Sri Lanka and urged coordinators to use the platform to build networks, deepen professional development and contribute to industry-wide initiatives through active participation in APB activities.

Bank Coordinators serve as the association’s key link within their respective institutions, helping to promote APB programs, drive participation in continuous professional development, support membership engagement and facilitate communication between APB and bank teams – extending the reach of APB’s initiatives across the sector.

Committee chairpersons from APB’s Continuous Professional Development, Membership and Social, Publication and Special Events committees outlined their responsibilities and shared an overview of planned activities for 2026/2027.

The program concluded with a networking session, enabling coordinators to engage with APB leadership and peers and strengthen collaboration across Sri Lanka’s banking community.

When Sri Lanka opened its doors to global markets in 1977, it was hoped that liberalising trade would bring about prosperity, new industries and secure employment. More than four decades later, the picture is far more complex.

While trade has transformed parts of the economy, one stubborn reality persists: nearly 70 per cent of Sri Lanka’s workforce remains trapped in informal jobs, positions without legal contracts, social security or reliable protections.

These jobs are everywhere, from garment factories and rural workshops to small-scale production lines. They are often unstable, poorly paid and leave workers without recourse when exploited. Why has the expansion of trade not led to more secure employment? And what does this mean for Sri Lanka’s future?

A timely study by Nilupulee Rathnayake, conducted under the Neelan Tiruchelvam Trust’s Macroeconomic Policy and Socioeconomic Rights Fellowship, provides some answers. Her paper, titled ‘Trade Policy and Informal Employment in Sri Lanka’s Manufacturing Sector,’ examines how tariffs, imports and exports between 2014 and 2021 shaped the reality of work for millions of Sri Lankans.

The findings challenge assumptions that global integration automatically improves people’s livelihoods. It also suggests that, without the right safeguards, trade reforms can deepen inequality rather than reduce it.

Trade policy and informal reality

Economic theory often assumes that trade liberalisation, reducing tariffs and opening markets, creates jobs and improves living standards. Yet, Rathnayake’s study shows that whether those jobs are secure or vulnerable depends on how industries respond to market incentives.

Her analysis found that industries with higher tariffs, i.e., those shielded from global competition, had more informal jobs. Protected firms, facing little external pressure to innovate, often choose the easiest way to cut costs, i.e., by hiring workers without contracts, benefits or protections. By contrast, industries exposed to competition through lower tariffs tended to see reductions in informality, as firms were compelled to modernise and comply with more formal labour standards.

Imports were linked to lower levels of informal employment, possibly because imported goods pushed domestic firms to raise efficiency and standards. Yet, surprisingly, exports were associated with higher levels of informal work.

This finding runs counter to global patterns. In many countries, export-oriented industries tend to formalise because international buyers demand compliance with labour standards. In Sri Lanka, however, flagship export industries like apparel often rely heavily on subcontracting and casual labour. Instead of generating secure employment, booming exports have reinforced dependence on flexible, low-cost and often informal work arrangements.

A shock that changed the equation

The COVID-19 pandemic added another twist. Rathnayake’s research found that during 2020-21, the usual patterns between tariffs, imports, exports and informality broke down. Faced with the crisis, firms scrambled to cut costs and workers were pushed in greater numbers into precarious, informal jobs.

This disruption exposes the fragility of the protection available to workers. Without strong safety nets, economic crises, global pandemics, debt defaults or currency crashes tend to hit the most vulnerable workers the hardest.

The human cost of informal work

The consequences of Sri Lanka’s informal-dominated labour market go far beyond economics. At its core, this is about rights and dignity. Informal workers lack access to pensions, health coverage and unemployment benefits. They cannot bargain collectively or easily seek justice if mistreated. For many, this means a lifetime of insecurity.

Women bear the brunt. They are more likely than men to be employed informally, especially in sectors like apparel and small-scale manufacturing. Trade-related shifts that increase informality thus deepen existing gender inequalities.

Rural and provincial workers are also disproportionately affected. Unlike their counterparts in Colombo, they often lack access to formal job opportunities and remain trapped in informal arrangements. Similarly, workers with lower levels of education face higher risks of informality, limiting their prospects for upward mobility.

The ripple effects are profound. Families that depend on informal incomes face cycles of vulnerability and poverty. Entire communities risk exclusion from the benefits of economic growth. When crises hit, as Sri Lanka’s recent economic collapse so painfully showed, informal workers are the first to fall through the cracks.

What needs to change?

Rathnayake’s study makes a clear case that trade liberalisation alone will not deliver decent work. To ensure that integration with global markets uplifts people rather than exploits them, trade policies must go hand in hand with labour protections.

She offers several recommendations. Trade reforms must be paired with strong labour protections, where opening markets is accompanied by enforcement of fair contracts, safe working conditions and compliance with labour standards.

Social safety nets must be strengthened as systems of unemployment benefits, health insurance and pensions are vital to protect workers, especially during crises.

Export sectors should be targeted for reform-since industries like apparel rely heavily on informal subcontracting, they must be prioritised for oversight and reform. Policies should support small producers in transitioning to formal operations while holding larger firms accountable.

Finally, crisis-sensitive policies must be built: economic shocks are inevitable, but policies can be designed to prevent sudden spikes in informal employment. Emergency protections for workers can make the difference between survival and destitution.

A question of justice

Rathnayake’s research underscores that trade policy is not just an economic issue but a matter of justice and rights. The right to decent work is internationally recognised as a socioeconomic right. Yet, in Sri Lanka, that right remains elusive for the majority of workers.

If trade continues to expand without parallel labour protections, the country risks entrenching inequality and exclusion. If policymakers act decisively, trade could become a driver of inclusive growth, such as lifting women and rural workers into secure, dignified and formal employment.

As Sri Lanka grapples with economic recovery and seeks to rebuild its global competitiveness, the question is not simply how much the country trades but also on what terms and at whose expense.

Looking ahead

The debate over trade and jobs is not unique to Sri Lanka. Across the Global South, countries struggle with how to balance competitiveness with fairness, efficiency with protection, and growth with dignity. Rathnayake’s research adds an important Sri Lankan perspective to this global conversation.

Her findings remind us that economic reforms cannot be judged solely by GDP growth or export earnings. They must also be measured by whether ordinary workers gain security and stability.

For now, Sri Lanka’s workers, especially those in informal manufacturing jobs, continue to live in uncertainty. This demands a different path of trade-based growth, one where trade is harnessed, not just for markets and profits, but also for people and their rights.

As the global printing and packaging industry undergoes a significant transformation driven by automation, artificial intelligence and smart manufacturing, industry leaders are increasingly focused on delivering integrated solutions that enhance efficiency, sustainability and long-term competitiveness.

These trends took centre stage at Sri Lanka Print Expo 2026, organised by the Sri Lanka Association of Printers (SLAP), which brought together industry stakeholders, technology providers and manufacturers to explore the future of the sector.

Among the international participants was Masterwork Group General Manager – Sales Maxen Liu, representing one of China’s leading manufacturers of printing, packaging and post-press solutions.

In an interview with the Daily FT, Liu shared insights into emerging industry trends, innovation, sustainability and why he believes Sri Lanka is among Masterwork’s fastest-growing markets.

Q: Could you briefly introduce Masterwork Group and its global footprint?

A: Masterwork Group has been operating for 31 years. We started with hot stamping and die-cutting machines, and today we have expanded to seven product series with more than 100 machine models. Our portfolio includes hot stamping, die-cutting, foil printing, inspection systems, laser die-cutting and digital solutions.

Our vision is to become a total solutions provider for the printing and packaging industry. In addition to machinery, we now offer smart factory solutions, including ERP and MES software systems, automated guided vehicles (AGVs), robotic pallet transfer systems and smart warehouse solutions. Together, these technologies enable customers to build fully integrated smart factories.

Q: What are the biggest trends currently shaping the global printing and packaging industry?

A: The first major trend is the shift from standalone machines to complete solutions. Customers no longer want just one machine; they are looking for integrated systems that improve productivity across the entire production process.

The second trend is efficiency. Machines are long-term investments that may be used for 10 to 20 years. Customers increasingly focus on efficiency, productivity and cost performance rather than simply comparing purchase prices.

Chinese manufacturers have made significant progress in recent years. While European machines have traditionally been recognised for stability, Chinese companies now offer excellent performance combined with strong cost competitiveness.

Q: How is digital transformation influencing post-press and finishing technologies?

A: We are seeing more short-run orders, which means job changeover times need to be shorter. If machine setup takes too long, productivity is reduced.

To address this, we have developed features that reduce make-ready times and simplify operation. Functions such as Quick Set and Auto Set enable operators to prepare machines much more efficiently, reducing downtime and increasing productivity.

Q: Masterwork is known for innovation. What recent innovation are you most excited about?

A: We invest between five and seven percent of our annual revenue in research and development, which helps us continue leading the market through innovation.

One innovation I am particularly proud of is our patented Dual Press technology. This machine combines hot stamping and die-cutting in a single pass.

This was especially valuable in China’s tobacco packaging sector, where some products require multiple hot-stamping processes. With Dual Press technology, two hot-stamping operations and die-cutting can be completed in a single pass, significantly improving efficiency while reducing waste.

It is a good example of how innovation can increase productivity while supporting sustainability goals.

Q: How are emerging technologies such as AI and smart manufacturing impacting your systems?

A: We have a dedicated subsidiary focused on smart manufacturing solutions. Before introducing solutions to customers, we first test them in our own factories.

We have around 150 people working in software development and coding. We combine our practical experience with research and development to create integrated solutions that include software systems, AGVs, smart warehouses and intelligent manufacturing platforms.

We are also exploring how artificial intelligence can be connected to our machinery and software systems. In the future, AI could become the brain of the printing plant, helping manufacturers optimise operations and improve decision-making.

Q: What should printing companies invest in today to remain competitive over the next decade?

A: Automation.

Labour costs continue to increase, while automation technologies are becoming more mature, accessible and cost-effective.

Companies should focus on two areas. The first is logistics automation, including material handling and warehouse management. The second is production automation through advanced machine features and intelligent configurations that reduce manual intervention and improve efficiency.

Q: There are concerns that AI and automation may affect jobs. What is your perspective?

A: I do not believe jobs will be completely replaced. Technology can improve efficiency significantly, but people will continue to play an important role.

Instead of replacing workers, AI and automation will allow people to focus on more creative, higher-value and specialised tasks. Human experience, judgment and creativity remain essential.

Q: Sustainability has become a major focus worldwide. How is Masterwork helping customers reduce their environmental impact?

A: Sustainability is increasingly important for customers, especially in international markets.

One of our core philosophies is that we focus on customer interests, not just customers themselves. Sustainability is one of those interests.

In addition, we have entered the renewable energy sector and now provide rooftop solar panel solutions for industrial customers. This is another way we are helping businesses improve sustainability while reducing operating costs.

Q: What opportunities do you see for Sri Lanka’s printing and packaging industry?

A: Sri Lanka has become one of our top five emerging markets.

We have supplied a significant number of machines across the pre-press, printing and post-press segments. The market is showing strong momentum, and there is clear interest in adopting modern technologies.

I believe there are significant opportunities for local companies to improve efficiency, expand capabilities and enhance competitiveness through technology adoption.

Q: How does Sri Lanka compare with other emerging markets, and are there plans to strengthen partnerships here?

A: Absolutely. We want to strengthen our cooperation with our local partner and continue exploring the market with a broader product portfolio.

We see long-term potential in Sri Lanka and are committed to supporting the industry’s development.

Q: What advice would you offer local printing companies looking to grow and compete internationally?

A: One of the best ways to learn is through exposure to successful operations.

We hope to organise dedicated visits for Sri Lankan customers to China so they can see advanced manufacturing facilities and reference customers across different industries, including premium packaging, wine labels and tobacco packaging.

Learning from successful examples can help businesses understand market trends, technologies and operational strategies that can be adapted locally.

Q: What challenges does the industry currently face?

A: Economic conditions remain one of the biggest challenges.

Even when customers appreciate the value of new technology and machinery, investment decisions are influenced by the broader economic environment. When economies face difficulties, businesses also become more cautious.

We are confident in our products and solutions, but economic stability plays a major role in supporting industry growth and investment.

Q: What is your vision for the future of printing and packaging over the next five years?

A: Some people describe printing and packaging as a sunset industry, but I disagree, especially when it comes to packaging.

Every product needs packaging. It is part of our daily lives, and demand will continue to exist. That is why I believe packaging is an evergreen industry.

I expect the sector to continue growing steadily year by year. It may not grow as rapidly as industries such as artificial intelligence or digital technology, but it will continue expanding at a stable pace, closely aligned with economic growth.

Q: Which technology do you believe will be the biggest game changer for the industry?

A: Artificial intelligence.

AI has the potential to transform how printing plants operate by improving efficiency, decision-making and integration across manufacturing processes.

Q: Finally, what message would you like to share with industry professionals and young people considering a career in this field?

A: Stay humble and stay curious.

This is not an industry where success happens overnight. You cannot expect to move from the starting point to the top within a very short period.

However, if you work hard, continue learning and remain committed to improvement, you will grow steadily and achieve success. Consistency and dedication are the keys to long-term success.

As the industry continues to evolve, Liu believes success will depend on embracing automation, AI and smart manufacturing while maintaining a strong focus on customer value. He sees significant opportunities for Sri Lanka to strengthen its competitiveness through technology adoption and industry collaboration.

Looking ahead, Liu remains optimistic about the future of the industry, citing steady demand, technological innovation and growing opportunities in emerging markets such as Sri Lanka.

‘Every product needs packaging,’ he said. ‘That’s why I believe it is an evergreen industry.’

For nearly two decades, Sri Lanka’s exporters operated under one of the more distinctive features of the country’s VAT regime: the Simplified Value Added Tax (SVAT) system.

The roots of the system date to the early 2000s, when a significant VAT fraud scandal severely damaged public and institutional trust in the tax administration. The Inland Revenue Department (IRD) responded not by fixing the refund system, but by largely eliminating cash refunds altogether. The consequences for exporters were severe: prolonged delays in refund processing created acute liquidity pressure on businesses whose competitiveness depends on swift cash flow.

The Suspended VAT scheme that emerged in 2005 was a pragmatic and, in its original form, well-targeted response to that problem. Initially administered by the Textile Quota Board for apparel exporters and the Export Development Board for other sectors, the scheme replaced direct cash refunds with a credit voucher system. Exporters could carry out operations without upfront VAT payments, striking a workable balance between accountability and the practical needs of export-driven businesses. From 2005 to 2011, it served Sri Lanka’s export sector well – facilitating cash flow management and supporting the competitiveness of local industries in global markets.

In 2011 the scheme was transferred to the IRD’s oversight and rebranded as the Simplified VAT Scheme. Eligible exporters and their domestic suppliers were designated as Registered Identified Purchasers (RIPs) or Registered Identified Suppliers (RISs), transacting without monetary settlement of VAT at all – the liability recorded, but not paid. The elegance of the arrangement was precisely its avoidance of cash: no cash changed hands, a credit voucher was used instead. At the same time, however, the scope of the scheme was expanded beyond its original mandate to cover local construction projects and Special Development Projects, a decision that would, over time, significantly complicate the system’s administration.

IMF’s technical assistance mission – March 2024

The IMF’s Fiscal Affairs Department conducted a Technical Assistance mission to Sri Lanka in March 2024 and identified that SVAT, intended to protect a relatively small population of genuine exporters, had expanded far beyond its original scope.

The IMF noted that eligibility for SVAT had been determined at a point in time and had never been reviewed in any substantive way since. Analysis of a sample of RIP and RIS taxpayers revealed that a portion no longer qualified for the scheme but continued to participate regardless.

Sri Lanka’s VAT revenue amounted to only 2% of GDP in 2022, significantly below regional benchmarks. The Inland Revenue Department (IRD) attributed a substantial portion of this underperformance to the SVAT mechanism, while overlooking the fact that it was the IRD’s own administrative shortcomings, particularly the failure to adequately monitor and regulate the mechanism-that allowed it to expand beyond its intended scope.

In response, policymakers moved hastily to repeal SVAT without a comprehensive understanding of the underlying issues. Given that SVAT is fundamentally a cashless system, a more prudent approach would have been to retain it with targeted reforms rather than eliminate it altogether.

SVAT’s expansion beyond its original mandate – to construction projects, SDPs, and a broadening pool of domestic supply chain participants – was an administrative and policy decision, not an inherent defect in the voucher mechanism itself. However, as part of Sri Lanka’s broader commitment to fiscal reform under the IMF-supported programme, the government undertook to repeal SVAT.

The replacement was a risk-based VAT refund mechanism, under which all VAT-registered persons – including exporters – now pay VAT in the ordinary course of business and claim refunds through a structured, risk-differentiated process.

Rather than suspending VAT collection altogether, the new system classifies taxpayers according to defined risk criteria, set out most recently in Gazette No. 2481/17. Taxpayers assessed as low risk are intended to receive expedited refunds with minimal verification, while those classified as higher risk are subject to more rigorous pre-refund scrutiny. The underlying premise is sound: refunds should be fast for compliant taxpayers and scrutinised for those presenting a genuine risk of fraud – rather than the SVAT-era default of avoiding refund decisions altogether by removing VAT from the transaction in the first place.

The risk-based refund system now being implemented is not inherently simpler or more resistant to abuse than a well-administered SVAT scheme would have been. It requires the IRD to build, at pace, a risk classification infrastructure, a refund processing unit, a post-payment audit programme, and the cultural disposition to make judgement calls on competing claims.

The transition represents far more than a procedural adjustment. It requires the IRD to develop and exercise institutional capabilities that SVAT had rendered largely unnecessary for two decades – risk assessment, data-driven decision-making and the consistent, judgement-based adjudication of refund claims at scale.

The operative framework: Gazette Extraordinary No. 2481/17

The Gazette No. 2481/17 of 26 March 2026 rescinds and replaces Gazette No. 2456/02 of 29 September 2025 in its entirety, effective from the same operative date of 1 October 2025. The March 2026 gazette is therefore the definitive and currently operative procedure document for the Risk Based Refund Scheme.

The original gazette (No. 2456/02) was issued on the eve of SVAT’s abolition on 29 September 2025, amid the legal challenge from the three business chambers that argued its conditions were insufficient. The revised and comprehensive Gazette No. 2481/17, signed by Commissioner General of Inland Revenue on 24 March 2026 and published on 26 March 2026, sets out a full procedure document.

Who is eligible?

The gazette defines four categories of eligible persons who may claim VAT refunds under the scheme and there are no changes in the categories of eligible persons when compared to previous Gazette,

The risk rating framework: Six criteria, five-year look back

The Commissioner General of Inland Revenue classifies every eligible person as low-risk, medium-risk, or high-risk having regard to the following criteria, drawing on information from a period not exceeding five years immediately preceding the last day of the preceding year – with one important exception: criterion (vi), the duration of the taxpayer’s engagement in business, carries no five-year cap.

Risk ratings are effective from 1 October 2025 and remain in force until reviewed or cancelled. The CGIR will review ratings at six-month intervals or at any time deemed necessary. For businesses, this means that compliance conduct from October 2025 onward is being actively tracked and will directly influence future refund timelines.

Conditions for eligible persons to expedite refunds

The gazette places ten specific obligations on eligible persons. These are not merely administrative formalities – failure or delay in meeting any of them may result in the outright rejection of a refund claim or significant processing delays:

Maintain accurate and current profile information in RAMIS, including a separate dedicated email address to facilitate refund issuance.

Update bank account details in RAMIS immediately upon any change to ensure secure and timely disbursement.

Provide all documentation, access, and facilities for both initial and periodic site inspections by the CGIR or authorised officials.

Submit required schedules via the schedule capture screen in IRD e-services, or via CSV upload through the IRD e-service portal.

Verify all uploaded schedules using the official Schedule Verification Tool available on the IRD web portal before submission.

Ensure all particulars and schedules are correctly prepared, validated, and uploaded to RAMIS.

Furnish all documentation requested by officials promptly to facilitate efficient verification.

Maintain up-to-date contact information including full name, telephone numbers, and email addresses of authorised representatives. Any changes must be formally requested in writing, signed by a company director or authorised officer.

Failure or delay in providing required information may result in outright rejection of the refund claim or delays in processing.

Where multiple projects are operated, maintain distinct and separate records to clearly identify input tax credit attributable to each Strategic Development Project or Specified Project.

The IMF blueprint Vs the Gazette

The IMF’s March 2024 Technical Assistance Report was not merely a background reference, it was a detailed operational blueprint, produced at Sri Lanka’s request, that set out precisely how the post-SVAT refund system should be designed and administered. A careful reading of Gazette No. 2481/17 against that blueprint yields a mixed verdict. In some respects, the gazette faithfully implements the IMF’s intent. In others, it departs significantly – and the gaps are not peripheral concerns. They go to the dimensions the IMF identified as most likely to determine whether the reform succeeds or fails.

On the core architecture, the three-tier low/medium/high risk classification is precisely what the IMF recommended. The six criteria for risk assessment – covering compliance history, refund claim history, prior audit findings, operational abnormalities, third-party institutional data, and business duration – closely mirror the suggested criteria in Annex II of the IMF report. The six-monthly rating review cycle, the annual eligibility review based on the preceding year’s VAT return data, and the 45-day refund commitment for low and medium risk taxpayers are all consistent with IMF good practice. These are genuine reforms and their codification in the gazette is to be commended.

However, the gazette departs from the IMF blueprint in ways that carry real consequences. The IMF’s most pointed structural recommendation – that risk channel selection should be driven by automated, transparent, statistically robust algorithms rather than discretionary committee decisions – finds no expression in the gazette. The CGIR is granted broad discretion to develop and apply criteria, without publishing the scoring methodology, the weighting of factors, or the thresholds separating risk categories. Until the IRD publishes the risk scoring algorithm in full, the six-factor framework in the gazette remains a statement of intent rather than a transparent and accountable system.

The IMF recommended that post-payment verification – selective audits conducted after refunds are paid – should be the primary tool for managing refund risk for low-risk taxpayers, replacing the 100 percent pre-payment cross-matching that had paralysed the old system. The gazette contains no structured post-payment audit programme. Its focus is almost entirely on pre-verification conditions and taxpayer obligations, which risk replicating the same defensive posture the reform was designed to dismantle.

The IMF’s focus was on building the IRD’s internal risk management capacity – the institutional, cultural, and technical changes needed within the administration. The gazette, by contrast, imposes ten specific compliance obligations on eligible persons as preconditions for receiving refunds, and explicitly warns that failure to meet any of them may result in outright rejection of a claim. The IMF envisaged the new system as one where the IRD bears the primary burden of building competence. The gazette redistributes a significant portion of that burden on taxpayers as gatekeeping conditions for receiving their own excess input credits back. Whether this reflects a lingering institutional reluctance to trust the refund process, or simply prudent system hygiene, is a question the first full year of operations will help answer.

Setting off VAT refunds

Currently, a key issue that requires the policy makers attention is the manner in which the the refunds are processed. The IRD officers adapts the practice of setting off current VAT refunds against outstanding tax liabilities that are neither final nor legally in default, but remain subject to ongoing dispute and appeal. This raises significant legal and administrative concerns. In many cases, taxpayers may feel compelled to accept such set-offs-not out of agreement, but due to the practical necessity of securing the timely release of refunds. Given the critical role that refund liquidity plays in sustaining business operations, particularly for exporters, delays in disbursement can create acute cash flow pressures, effectively placing taxpayers in a position where commercially expedient decisions override their legitimate rights of appeal.

This approach is also difficult to reconcile with the intent of the IMF’s March 2024 Technical Assistance Report, which does not advocate the routine set-off of refunds against outstanding liabilities. Instead, the IMF emphasises restoring confidence in the VAT system through the timely payment of legitimate claims, particularly for low-risk, compliant taxpayers, noting that the administration had shifted from ‘how to pay VAT refunds to how not to pay VAT refunds,’ and that prompt refunds are essential to the efficient functioning of a VAT. In this context, while offsetting may have a role as a revenue safeguard in limited circumstances, its broader or systematic application risks undermining the reform’s central objectives of improving liquidity, predictability, and trust in the tax system

The deeper challenge

What the IMF’s March 2024 Technical Assistance Report identified as the greatest risk to this entire transition was not a technical one. It was cultural.

The Inland Revenue Department has spent nearly two decades operating a system specifically designed to avoid making refund decisions. SVAT eliminated the need to adjudicate competing claims, assess risk and exercise judgement. The new system demands precisely those capabilities. The IMF warned clearly that installing new technology and issuing regulations would not be sufficient if the underlying institutional mindset did not shift.

Staff must accept that some degree of risk is inherent and unavoidable when processing VAT refunds – and that facilitating timely refunds to low-risk taxpayers is as integral to sound tax administration as auditing fraudulent ones. The six-factor risk criteria now codified in Gazette No. 2481/17 provide a clear framework for exercising that judgement.

Whether the IRD has meaningfully operationalised a risk-based refund system in practice, however, remains an open question. Businesses report that they are unaware of their risk ratings and are advised only to continue improving their compliance – without any clear indication of where they stand or what specific deficiencies are holding back their classification. This opacity raises a more fundamental question: is the rating genuinely system-driven, or is human intervention the determining factor? The integrity of any risk-based refund framework depends entirely on the answer to that question. The moment risk ratings become subject to individual discretion rather than objective, algorithmic criteria, the conditions for inconsistency – and potentially corruption – become difficult to exclude.

This is not a theoretical concern. It is the central test of whether Sri Lanka’s transition from SVAT to a risk-based VAT refund system represents genuine reform or merely a change in procedure.

Implementation is key

The transition to a risk-based VAT refund mechanism, following the repeal of the Simplified Value Added Tax (SVAT) system, has generated cautious optimism. Several large, compliant exporters have welcomed the reform, noting that refunds for the initial months were processed considerably earlier than anticipated – providing a meaningful boost to working capital and restoring a measure of confidence in the system. These early results demonstrate what a well-functioning, risk-based approach can deliver when supported by accurate data, robust compliance records and capable administration.

While the system has shown its potential, its overall effectiveness remains uneven. Structural challenges – particularly in risk classification, administrative capacity and documentation standards – continue to undermine consistency, leaving significant parts of the export sector exposed to liquidity pressures that the reform was designed to eliminate. Some businesses report that refund claims are being offset against other tax liabilities or delayed by procedural bottlenecks, outcomes that erode confidence in the very system intended to replace them.

The tightening of risk classification criteria under the latest gazette notification introduces a further concern. The increased weight placed on past audit history and compliance track records means that a broader segment of taxpayers may now find themselves classified as high risk – subjecting them to pre-refund verification and extended processing times precisely when working capital relief is most needed.

At a time when Sri Lanka’s export sector is navigating global demand uncertainty, rising cost pressures and persistent foreign exchange constraints, the importance of a predictable, efficient and fairly administered refund system cannot be overstated. The stakes extend well beyond administrative convenience – they reach directly export competitiveness, investor confidence and the country’s capacity to earn foreign exchange.

Ultimately, the shift to a risk-based refund system must amount to more than a change in procedure. It must be what it was designed to be: a system-driven, transparent and corruption-resistant mechanism that delivers refunds on merit, not on discretion. The credibility of this reform – and the trust of the business community it seeks to serve – will be determined not by the regulations on paper, but by the integrity and consistency with which they are applied in practice.

The Cabinet on Monday approved the award of a ground handling services contract for SriLankan Airlines at Delhi’s Indira Gandhi International Airport in India.

Cabinet Spokesperson and Minister Dr. Nalinda Jayatissa said the contract was awarded following a limited international competitive bidding process to select a service provider for air handling and ground handling operations at the airport.

Two bids were received in response to the tender.

Following the evaluation process, Cabinet approved a proposal submitted by Minister of Ports and Civil Aviation Bimal Rathnayake to award the contract to Bird Flight Services (India) Private Limited, the lowest responsive bidder.

The contract has been awarded at a value of Indian Rs. 332.85 million (LKR 1.1 billion) for a period of three years from 1 June 2026 to 31 May 2029.

The decision was taken based on the recommendations of the Standing Procurement Committee.

The ground handling arrangement covers operational support services required for SriLankan Airlines’ operations at Delhi, one of the carrier’s key destinations in the Indian market.

It was a banner-day for a pair of FIFA World Cup greats. Mercurial Argentina forward Lionel Messi became the tournament’s all-time top-scorer as he grabbed both goals in a 2-0 win over Austria, while Kylian Mbappe moved joint-second with two of his own.

Having started the day level with Miroslav Klose, La Pulga now stands alone with 18 goals but Mbappe showed that this heavyweight goal battle could go the full eight rounds until a potential New York New Jersey showdown on 19 July.

Prolific Norway marksman Erling Haaland showed that he, too, will be a prominent voice in the adidas Golden Boot conversation, scoring a second consecutive brace as Norway joined Argentina and France in qualifying for the Round of 32 as they edged Senegal by the odd goal in five.

Argentina 2-0 Austria

There is Messi and there is no other. Last week the iconic Argentine went past Just Fontaine, Gerd Muller and Ronaldo. Today the 16-goal World Cup mark he shared with Miroslav Klose also fell.

Messi’s brace came after he had missed an early penalty, meaning that he has now scored all five of Argentina’s goals, at a tournament where they are also yet to concede. The defending champions strolled into the Round of 32 with a match to spare, ahead of a final group outing against Jordan on Saturday.

France 3-0 Iraq

After Messi had laid down the gauntlet earlier in the day, Kylian Mbappe showed that he is more than capable of matching the magical Argentinian. Making his 100th international appearance, the explosive captain scored either side of an extended half-time break to pilot France into the Round of 32.

Michel Olise also starred, with a pair of assists, and Ousmane Dembele scored the third for a Les Bleus side that now face a section-settling showdown with Norway on Friday.

Norway 3-2 Senegal

On a remarkable day of goalscoring, Erling Haaland and Ismaila Sarr made it four braces across the four matches, as Norway pipped Senegal in New York New Jersey. Having lost Julian Ryerson to an early injury, it was his replacement Marcus Pederson who struck to send Norway to the break with a narrow lead.

Haaland doubled the advantage with his first three minutes after the restart before Sarr responded shortly after. Just shy of the hour the Manchester City striker restored the two goal buffer, with Sarr reducing it in additional time in a ding-dong clash. Norway are also through to the knockouts but sit second behind France on goal difference.

Jordan 1-2 Algeria

Having impressed in their maiden World Cup match last week, Jordan started brightly against Algeria in San Francisco. That positivity was rewarded as a mis-hit shot from Mousa Al Tamari feel kindly to midfielder Nizar Al Rashdan who swept home to send the West Asian nation to the break with a slender lead.

That was as good as it got though as two Algerian set-pieces, the first a header from a corner via substitute Nadhir Benbouali, the second a bundled close-range Amine Gouiri effort after another corner, saw them claim a 2-1 win. That keeps Algeria’s hopes alive, while Jordan are now eliminated. (FIFA)