Earlier the fabric was subject to Rs 100/kg CESS at the time of imports. The Budget- 2108 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 August 16, 2018.
As fabric was also subject to this 15 percent VAT, 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 have the adverse effect.
The minister made this decision to amend the VAT act further to reduce the VAT on imported fabric to 5 percent considering the possibility of giving a helping hand to proposed small scale industrialists under the enterprise Sri Lanka scheme. The Enterprise Sri Lanka, the subsidized loan scheme by the ministry of finance and mass media has introduced an interest subsidized loan scheme for medium and small-scale manufacturing industrialists and they can obtain fabric, as raw material at a low cost.