Sri Lanka has cut reduced the value added tax (VAT) on imported fabric from 15 per cent to 5 per cent considering the requests made by stakeholders in the fabric industry. The ministry noted that 5 per cent rate had been set for the industry on Aug. 16. But smaller companies not covered by VAT appealed, saying the tax would have a negative impact on them.

The ministry then decided to reduce the VAT on imported fabric to 5 per cent in order to lend helping hand to proposed small-scale industrialists under the Enterprise Sri Lanka Program. This is a subsidised loan plan introduced by the ministry to help medium and small-scale manufacturers obtain fabric at a lower cost.

As per the Sri Lanka Apparel Export Association, the country’s apparel exports grew by 4 per cent to $2.8 billion for the first half of the year compared to the same period a year ago. U.S. apparel imports from Sri Lanka declined by 12.15 per cent to 28.93 sq. mt. equivalents in July compared to a year earlier. For the year through July, apparel imports from Sri Lanka reduced by 4.65 per cent to $1.84 billion worth of goods, giving the country a 4.65 per cent market share.