The 2027 Budget has failed to provide any meaningful relief to Small and Medium-Sized Enterprises (SMEs), particularly the cottage apparel industry, which is already facing widespread closures, Ceylon United Business Alliance (CUBA) Policy and Reforms Chairman M.R. Jeffrey has warned.

Speaking on the 2027 Budget, Jeffrey said the absence of tax concessions, Value-Added Tax (VAT) relief, electricity subsidies, or other targeted incentives would further undermine SMEs and accelerate closures in small-scale manufacturing.

“This is not a supportive budget; it is a detrimental one. It is going to make more industries close down because there is no tax relief, no VAT relief, and no Social Security Contribution Levy (SSCL) relief,” he said.

He said that the cottage apparel industry, one of Sri Lanka’s largest domestic manufacturing sectors, had been overlooked despite its contribution to meeting local demand and reducing dependence on imports.

Jeffrey noted that Sri Lanka’s domestic apparel industry had shown resilience even during periods of import restrictions, including those imposed in 2002. Unlike several other sectors that faced shortages of imported vehicles, motor spare parts, and medicines, the domestic apparel industry was able to meet local requirements.

He argued that the failure to support local garment manufacturers would ultimately encourage imports, as consumers would have to depend on foreign products when domestic producers were forced out of business.

Jeffrey said that the industry had expected the Government to introduce targeted incentives for SMEs, similar to measures adopted in India, particularly in view of the substantial increase in electricity costs and the heavy tax burden on small manufacturers.

He estimated that SMEs were facing an overall tax burden of around 50–55% when Corporate Income Tax, SSCL, VAT, and cascading taxes across supply chains were taken into account.

While large importers might absorb certain costs, he said SMEs that purchased raw materials and inputs through multiple intermediaries ended up paying considerably more than the headline tax rates suggested.

“We have been supporting the Government despite the difficult situation. With all the additional revenue the Government is collecting, it should have provided some relief to SMEs. Otherwise, we will see these businesses closing down,” he said.

He further highlighted the social impact of the decline of the cottage apparel industry, pointing out that a significant number of women, particularly widows, depended on these small-scale manufacturing operations for their livelihoods.

According to Jeffrey, the industry had recorded an estimated 24% decline in the previous year, although he cautioned that the actual number of closures could be higher because cottage industries were not adequately captured in official statistics.

He said that many small entrepreneurs had invested their life savings, often between Rs. 1 million and Rs. 3 million, in these businesses and were now at risk of losing their investments and sources of income.

Jeffrey also criticised the Government’s failure to enforce existing product standards, saying industry representatives had raised concerns directly with the President in April and warned that businesses could close within six months unless action was taken.

Although he had subsequently been appointed to a standards committee, he said officials had indicated that developing new standards could take up to two years.

He argued that an existing standard developed by the Sri Lanka Standards Institution (SLSI) could have been enforced immediately rather than waiting for a new process to be completed.

“This is not only about the budget. It is a continuing failure. We told them that the industry was closing down, but even the existing standards have not been enforced,” he said.

He also questioned the Government’s approach to industrial protection, claiming that certain larger industries and manufacturers had received substantial protection while the much wider cottage industry, which provided livelihoods to vulnerable communities, had been neglected.