The island's clothing industry is the main beneficiary, using the tax breaks to sell to high street retailers in Europe. The decision came after an "exhaustive investigation... identified significant shortcomings in respect of Sri Lanka's implementation of three UN human rights conventions," the commission said in a statement.
The suspension of the GSP+ (Generalised System of Preferences plus) benefits will not take effect for six months "giving Sri Lanka extra time to address the problems identified," the EU executive added.
"I would like to emphasise that I hope Sri Lanka will sit with us over the next six months in order to agree upon a set of measures that will result in rapid, demonstrable and sustainable progress in relation to the human rights shortcomings we have identified," said new EU Trade Commissioner Karel De Gucht.
The European Union's GSP+ scheme gives 16 poor n