Vehicle prices rise due to new tax increases

The Ministry of Finance has taken steps to impose a 50 percent surcharge on customs import duties levied on vehicles imported into Sri Lanka. According to a special gazette notification issued with the signature of President Anura Kumara Dissanayake, this new tax revision will be effective for a period of three months starting today (16).

Although the Ministry of Finance had previously decided to remove this 50 percent surcharge from April 1st, the government has again taken steps to re-implement it from today. However, the government clarifies that this new surcharge will not apply to vehicles for which Letters of Credit (LCs) were opened on or before May 15th.

The Sri Lanka Vehicle Importers' Association (VIASL) states that due to the newly imposed 50 percent surcharge by the government, the price of a vehicle in the local market will increase by at least Rs. 1.5 million. The association warns that this situation will make it even more difficult for consumers to purchase vehicles. Commenting to the media on the current market situation, Arosha Rodrigo, media spokesperson for the Vehicle Importers' Association, stated that with this new tax added to the existing customs duties and the appreciation of foreign exchange rates, vehicle prices will become unaffordable. Accordingly, he points out that the prices of various types of vehicles could increase by an amount ranging from Rs. 1.5 million to Rs. 2.5 million in the future.

It was further clarified that the customs duty payable for all vehicles imported privately as well as through vehicle dealerships will increase due to this surcharge. Although those who opened Letters of Credit before May 15th are exempt from this surcharge, they too have to face high costs due to the appreciation of foreign currencies such as the US Dollar and Japanese Yen. The collective impact of this new 50 percent surcharge, fluctuations in foreign exchange rates, and the recently increased 2.5 percent Social Security Contribution Levy (SSCL) will lead to a massive price increase across the entire vehicle market in the future.