Thousands of parcels ordered by Sri Lankans from global e-commerce giants such as TEMU, AliExpress, and eBay remain stuck at Sri Lanka Customs, caught in a legal grey zone that is choking the flow of goods and frustrating consumers and small businesses alike.
The Advocata Institute, an independent think tank, warned that the absence of a modern legal framework enabling e-commerce platforms to collect taxes at the point of sale has created severe customs delays, bottlenecks in supply chains, and a significant loss of potential government revenue.
“Ensuring consumer choice through a competitive market is key to delivering reasonable prices and better quality for Sri Lankans,” Advocata said in a statement issued today.
Until June, incoming parcels were taxed under an informal “per kilo” system where clearing agents declared goods as personal effects and paid a flat fee. This unofficial workaround, however, collapsed under the recent surge in cross-border shipments driven by popular platforms.
Customs has now scrapped the per kilo system and imposed item-level taxes based on HS Codes. Every parcel’s contents must be declared individually, an exercise that is proving impossible at current volumes, resulting in severe backlogs and consumer frustration.
Small and medium enterprises are also being hit hard, as many rely on platforms such as TEMU and AliExpress to source essential inputs.
Advocata stated that the core problem lies in Sri Lanka’s outdated legislation and complex tariff system. Unlike countries such as Singapore and Australia, which allow foreign vendors to collect and remit taxes upfront before goods leave warehouses, Sri Lanka has no legal provision to enable such models.
The think tank recommends adopting a Vendor Collection Model where platforms collect and remit taxes at the point of sale. This would remove the need for HS code classification at customs, exempt low-value goods through a clear de minimis threshold (e.g., USD 75), and ensure only high-volume platforms (handling over 10,000 parcels a month) comply by registering locally or appointing tax representatives.
“Relying on HS code-based tariff enforcement at the border for thousands of small parcels is impractical. It risks driving e-commerce platforms away altogether,” Advocata warned.
The institute stressed that this is not merely about revising tariff rates but about fixing how taxes are collected.
“Without reform, parcel delays will worsen, customs will choke, and public revenue will continue leaking as e-commerce grows,” the statement added, noting that delays also undermine consumer choice, competitive pricing, and innovation.
Advocata urged policymakers to act swiftly, emphasising that modernising Sri Lanka’s tax framework to accommodate e-commerce will protect consumer choice, secure state revenue, and keep trade flowing efficiently.
