The Sri Lanka Vehicle Importers’ Association has raised alarms over a significant potential hike in vehicle import taxes, which are currently set at an eye-watering 300%. According to the association, these taxes could surge even further, with rates climbing to as high as 400%, 500%, or even 600% for certain vehicles.
Prasad Manage, the president of the association, highlighted that this sharp increase is due to the complex structure of taxes imposed on vehicle imports. “There is a special import tax based on the vehicle’s value. In addition, a luxury tax is applied, and all three taxes are added to the CIF (Cost, Insurance, and Freight) value. On top of that, an 18% VAT is levied. Essentially, four different taxes come into play, significantly inflating the final cost of a vehicle,” he explained.
The association warns that the impact of these new taxes will be substantial. For example:
The tax on a Wagon R could increase from Rs. 1.6 million to over Rs. 1.8 million.
The tax on a Vitz could rise from Rs. 2 million to approximately Rs. 2.4 million.
Taxes on vehicles like the Toyota Aqua, Corolla, and Axio, which were previously in the range of Rs. 5.7 million to Rs. 6.6 million, could now soar beyond Rs. 6.6 million.
While the steep hike in taxes will lead to a dramatic rise in the cost of importing vehicles, the association notes that the prices of vehicles already available in the local market are likely to see only a modest increase.
Despite the looming tax hikes, the association has urged the public not to panic. Mr. Manage advised potential buyers to be patient and wait for the arrival of new vehicles in Sri Lanka, as the supply situation may stabilize in the near future.
Sri Lanka imposed strict restrictions on vehicle imports in 2020 amid a severe economic downturn. However, with the implementation of the International Monetary Fund’s (IMF) Extended Fund Facility (EFF) program and the recovery of foreign reserves, there has been a renewed sense of optimism regarding vehicle imports.
In September 2024, the Cabinet approved the phased importation of motor vehicles and wheeled items under 304 Harmonized System (HS) Codes, with these imports set to begin in February 2025.
However, a recent gazette notification issued by the President introduced new excise duty amendments for vehicle imports. These changes will increase excise duties on both fuel-powered and electric vehicles, depending on factors like cylinder capacity and the age of the vehicle.
The combination of the escalating taxes and the new excise duty changes signals a challenging road ahead for vehicle importers and potential buyers alike, with costs expected to soar to unprecedented levels.
