Evolution of Vehicle Import Duty in Sri Lanka and Its Impact on Prices

The Customs Import Duty (CID) applicable on motor vehicles in Sri Lanka has undergone several changes through a series of Gazette Notifications issued under the Customs Ordinance (Chapter 235).

These changes mainly relate to the introduction, removal, and reintroduction of a 50% surcharge, together with adjustments to the base duty. As a result, the effective tax burden on vehicle imports has increased significantly over time.

This article explains the evolution in a simple chronological manner, followed by a practical step-by-step calculation to understand the real impact.

1. Introduction of 50% Surcharge (Effective from 01.02.2025)

As per Gazette Notification No. 2421/43 dated 31.01.2025, a 50% surcharge was imposed on the applicable CID.

• Original CID: 20%
• Effective duty: 20% × 150% = 30%

Impact:
Vehicle import duty increased from 20% to 30% with effect from 01st February 2025.

2. Extension of Surcharge Period

Through Gazette Notification No. 2473/31 dated 30.01.2026, the surcharge was extended:

• Applicable period: 01.02.2026 to 31.12.2026

Impact:
The 30% effective duty continued without change.

3. Removal of Surcharge (Effective from 01.04.2026)

As per Gazette Notification No. 2479/55, the surcharge was rescinded:

• Effective from: 01st April 2026

Impact:
Duty temporarily reduced to 20%.

4. Increase in Base Customs Duty

Simultaneously, Gazette Notification No. 2478/03 increased the base CID:

• New CID: 30%

Impact:
Even without the surcharge, the duty remained at 30%, maintaining the same tax burden through a structural change.

5. Reintroduction of Surcharge (From 16.05.2026)

As per Gazette Notification No. 2488/56, the surcharge was reintroduced:

• 50% surcharge on CID
• Effective from: 16th May 2026
• Duration: 03 months

Special Condition:
This surcharge does not apply where the Letter of Credit (L/C) was opened on or before 15th May 2026

Impact:

• CID: 30%
• Effective duty: 30% × 150% = 45%

6. Additional Impact of SSCL (From 01.05.2026)

In addition to the above, the Social Security Contribution Levy (SSCL) is applicable on imports from 01st May 2026, further increasing the overall tax burden.

Summary of Changes

Practical Impact on Vehicle Price – Nissan Dayz 2024 (Actual Case Study)

To clearly demonstrate the impact of recent tax changes, we have used a Nissan Dayz 2024 vehicle as a practical example.

It is important to note that the initial cost of approximately Rs. 7.35 million represents an actual vehicle import completed prior to these changes.

The revised calculation below is prepared using the same vehicle and cost structure, purely to illustrate the real impact of CID revisions, surcharge changes, and the introduction of SSCL.

Accordingly, this reflects a real-world impact, not a theoretical estimate.

Step 1 – CIF Value

Step 2 – CID Breakdown (Key Change)

Step 3 – Other Import Duties

Step 4 – VAT Impact

Step 5 – SSCL Impact

Step 6 – Other Charges

Final Cost Comparison

Final Interpretation

The same Nissan Dayz 2024 now costs approximately:

Rs. 660,000 more

Key Takeaways

• Effective CID increased from 30% → 45%
• SSCL introduced an additional tax burden
• VAT increased due to higher tax base
• Taxes are applied on a cascading basis, significantly increasing final prices

Important Note on Exchange Rate Impact

This calculation has been prepared based on a constant exchange rate for comparison purposes.

Accordingly, recent exchange rate fluctuations have not been considered in this analysis. In practice, due to movements in the Sri Lankan Rupee, the actual vehicle cost may be higher than the figures presented above.