This action has been taken by the ministry to adhere to the International Monetary Fund (IMF) approved economic reform programme, a high ranking Treasury official disclosed.

According to tax policy measures stipulated in the programme, the fiscal authority is committed to significantly speeding up valid VAT refunds and abolishing the simplified VAT (SVAT) system.

The ministry will be revamping the VAT system by removing almost all product specific VAT exemptions, he added.

A resolution pertaining to the VAT and SVAT will be presented in Parliament shortly to revise the provisions applicable to the VAT Act abolishing the SVAT methodology. Approximately 1.2 per cent of the gross domestic product from the tax revenue could be increased by reactivating the standard VAT, official documents presented to the cabinet indicated.

The need of introducing an efficient and proper VAT refunding mechanism has been brought to the notice of the Parliamentary sectorial oversight committee on economic affairs by representatives of several Sri Lanka exporters at a recent meeting.

Finance Ministry officials who attended the meeting pointed out that the government will implement an efficient tax system with proper refunding mechanism similar to developed countries.