The Sri Lanka Vehicle Importers’ Association has expressed concerns over a significant potential increase in vehicle import taxes, which already hover around 300%. The association warns that taxes could climb as high as 400%, 500%, or even 600% for certain vehicles, mainly due to multiple layers of taxation.
Association president Prasad Manage explained, “There is a special import tax based on the vehicle’s value. Additionally, there’s a luxury tax, and all three are added to the CIF value. On top of that, an 18% VAT is applied. This results in four types of taxes determining the final cost of a vehicle.”
Projected Tax Hikes on Popular Vehicles
The association highlighted how these increased taxes could affect vehicle prices:
- Suzuki Wagon R: Taxes may rise from Rs. 1.6 million to over Rs. 1.8 million.
- Toyota Vitz: Current taxes around Rs. 2 million could increase to approximately Rs. 2.4 million.
- Toyota Aqua, Corolla, and Axio: Previously taxed between Rs. 5.7 million and Rs. 6.6 million, the taxes could now surpass Rs. 6.6 million.
While vehicle import costs are expected to surge, the prices of vehicles already in the local market are anticipated to see only minimal increases.
Advice for Buyers Amid Tax Changes
Despite the rising import taxes, Mr. Manage urged the public not to panic. He advised potential buyers to wait for new vehicle shipments to arrive in Sri Lanka, as supply levels may stabilise the market.
Policy Shifts Behind the Tax Changes
Sri Lanka has maintained strict restrictions on vehicle imports since 2020 due to the economic crisis. However, with the implementation of the International Monetary Fund’s (IMF) Extended Fund Facility (EFF) and the recovery of foreign reserves, there has been renewed optimism about easing import restrictions.
In September 2024, the Cabinet approved a phased resumption of motor vehicle imports under 304 Harmonized System (HS) Codes, effective from February 2025. However, a recent gazette notification introduced new excise duty amendments, further increasing taxes on both fuel-powered and electric vehicles based on cylinder capacity and vehicle age.