Taxes on vehicles may increase up to 600%: Vehicle importers

The Sri Lanka Vehicle Importers’ Association has raised concerns about the potential hike in vehicle import taxes, which are currently at approximately 300%. According to the association, taxes could climb to 400%, 500%, or even 600% for certain vehicles.

The president of the association, Prasad Manage explained that the sharp increase in taxes is due to multiple layers of taxation.

“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,” he said.

The association predicts that taxes on some vehicles will increase significantly. For instance:

• Taxes on a Wagon R could rise from Rs. 1.6 million to over Rs. 1.8 million.
• Taxes on a Vitz could jump from Rs. 2 million to approximately Rs. 2.4 million.
• Taxes on vehicles like the Toyota Aqua, Corolla, and Axio, previously Rs. 5.7 million to Rs. 6.6 million, could now exceed Rs. 6.6 million.

While the cost of importing vehicles will rise sharply, the association noted that the prices of vehicles already in the local market are likely to see only a slight increase.

Despite the rising taxes, the association urged the public not to panic. Mr. Manage encouraged potential buyers to wait until new vehicles arrive in Sri Lanka, as the supply situation may stabilize.

Sri Lanka imposed strict restrictions on vehicle imports in 2020 during the 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, optimism about vehicle imports returned.

In September 2024, the Cabinet approved the phased import of motor vehicles and wheeled items under 304 Harmonized System (HS) Codes, effective from February 2025.

However, a recent gazette notification issued by the President introduced new excise duty amendments on vehicle imports. These adjustments increase excise duties on both fuel-powered and electric vehicles, depending on cylinder capacity and vehicle age.