Car Imports Resume Amid New Tax Regime in Sri Lanka
Subsequent to the Gazette Notification (2421/41) issued by President Anura Kumara Dissanayake in his capacity as the Finance Minister, car importers are now placing their first orders after many years. However, concerns have arisen regarding the new luxury tax rates on private motor vehicles, which have made car ownership increasingly difficult for many potential buyers.
High Taxes Impacting Affordability
Sri Lanka has one of the highest tax regimes in the world, making car ownership particularly challenging for young individuals.
“For a youngster to get a car in Sri Lanka is a challenge. It is difficult to get a new car immediately unless you have wealthy parents or relations to fund you,” said Charaka Perera, Past President of the Ceylon Motor Trader’s Association.
Impact on Foreign Reserves
Meanwhile, Central Bank Governor Dr. Nandalal Weerasinghe is closely monitoring how car imports will affect the country’s foreign currency reserves. President Dissanayake recently stated that brand-new imported vehicles will be priced higher compared to current second-hand vehicles due to controlled import measures. He emphasized that unrestricted imports could drain Sri Lanka’s foreign reserves.
Import Regulations and Price Hikes
The Chairman of the Vehicle Importers’ Association of Sri Lanka (VIASL), Indika Sampath Merenchige, attributed the rising costs of Japanese vehicles to the government’s decision to allow the importation of vehicles up to 2 years old instead of the previous 5 to 7-year limit.
Merenchige expressed concerns that removing import restrictions as of today (01) would make it impossible for an ordinary citizen to purchase a vehicle for less than Rs. 10 million. He explained that if the 5-year limit had been retained, vehicles would have been priced between Rs. 6 million to Rs. 6.5 million, making them more affordable.
Projected Vehicle Prices in Sri Lanka
Due to the revised import regulations, vehicle prices have surged significantly. Merenchige highlighted the following estimated prices for popular Japanese vehicles:
Toyota Raize 1200cc – Could reach around Rs. 16 million
Toyota Yaris – Expected to exceed Rs. 11 million
Honda Vezel 1500cc hybrid – Rising from Rs. 19.5 million to Rs. 24 million
Suzuki Wagon R – Could exceed Rs. 10 million
The increase in prices stems largely from the decision to limit imports to vehicles that are only up to 2 years old. Industry experts continue to raise concerns that these high costs will keep car ownership out of reach for ordinary Sri Lankans.
