News Today: No tax for Sri Lankan garment exports to the UK under new DCTS reforms

Sri Lankan garment manufacturers are set to benefit massively as the UK introduces new liberalised trade rules in early 2026. These reforms ensure no tax for Sri Lankan garment exports to the UK, providing the sector with unprecedented tariff-free access and increased sourcing flexibility.

Under the UK’s Developing Countries Trading Scheme (DCTS), Sri Lanka enjoys Enhanced Preference status. Previously, Sri Lanka’s garment exports qualified for tariff-free access only if raw materials were sourced from South Asian countries under strict processing rules. With the new reforms, manufacturers can now source up to 100% of inputs from any country in the world while still enjoying tariff-free benefits in the UK.

This landmark change places Sri Lanka on par with lower-income countries like Bangladesh, which already benefit from Comprehensive Preferences under the scheme. The simplified rules of origin will make Sri Lanka’s apparel sector more competitive globally while lowering retail prices in the UK.

British High Commissioner to Sri Lanka, Andrew Patrick, emphasized the positive impact of the reforms, noting they would boost local manufacturing and provide affordability to UK consumers. Similarly, Mark Surgenor, President of the Council for Business with Britain, hailed the development as a “success story” for Sri Lanka’s garment industry.

The UK further announced the creation of an Asia Regional Cumulation Group, which includes 18 countries such as India, Vietnam, and Bangladesh. This allows Sri Lanka to count inputs from these countries as locally sourced, further strengthening its export potential.

By simplifying sourcing rules and expanding preferential access, the DCTS reforms are expected to bring significant economic benefits, more jobs, and improved competitiveness for Sri Lanka’s garment industry.