What to Expect as Sri Lanka Lifts Vehicle Import Restrictions

COLOMBO (News 1st); On March 1, 2020, the Sri Lankan government imposed restrictions on the importation of various goods, including vehicles, in response to the economic crisis that had emerged in the country. At that time, Sri Lanka was facing a severe shortage of both dollars and rupees.

However, the government has now decided to lift the ban on vehicle imports, considering the gradual improvement in economic indicators and the need to expand the economy. The International Monetary Fund has also expressed positive feedback regarding the easing of vehicle import restrictions.

"Currently, we are allowing the importation of commercial vehicles and motor vehicles, excluding cars. The next step is to open up for commercial vehicles, followed by motor cars. We aim to complete this process by February 1st. We believe that motor vehicles will contribute more than 1% to the Gross Domestic Product," said Dr. Kapila Senanayake, Director General of the Department of State Fiscal Policy at the Ministry of Finance.

What will be the prices of newly imported vehicles?

Prasad Kulatunga, Secretary of the Sri Lanka Vehicle Importers Association, explained:

"For a popular vehicle like the Toyota Aqua, the import tax will increase by 7,000,000 to 7,500,000 rupees. For a Honda Vezel, the import tax will increase by 8,000,000 to 8,500,000 rupees. When combined with the purchase price from Japan, these vehicles will have a significant cost for the public. Currently, a middle-class person would need to spend 10 to 15 million rupees to buy a vehicle. For a new Honda Vezel, the port price will be around 7.5 million rupees, with VAT adding another 8.5 to 9 million rupees. A V8 vehicle will cost around 110 million rupees, including taxes, with the tax alone being 8 million rupees."

However, the final decisions regarding the relevant taxes and other factors related to vehicle imports have not yet been announced. The Ministry of Finance expects to clarify these details before February 1st.

"We are waiting to see the gazette notification from the Ministry of Finance to understand the exact taxes we will face. We currently know about the excise duty and the 18% VAT. Once all tax types are included, we can provide an accurate calculation. We advise the public to be patient for a few more weeks until a clear tax policy is announced, which will open the market and bring competitive prices," said Prasad Kulatunga, Secretary of the Sri Lanka Vehicle Importers Association.

He also added that with the importation of vehicles, prices will stabilize to some extent. 
"There are people who have kept their money after selling their vehicles at high prices and are waiting to buy new ones. The government did not benefit from the increased prices of used vehicles. With new vehicle imports, the government can capture a significant amount of hidden money."