After nearly five years, the Sri Lankan government has lifted restrictions on vehicle imports for personal use, imposing heavy taxation to generate an estimated revenue of Rs. 300 million this year.
This move comes with nine stringent import control conditions. The import ban, originally introduced in 2020, was a response to economic instability following excessive money printing by the central bank based on IMF recommendations.
The flawed monetary policy framework has led to recurring foreign exchange shortages, prompting periodic import restrictions.
The new government officially lifted the temporary suspension through Gazette Extraordinary Notification No. 2421/44, issued on January 31, 2025, as part of efforts to boost state revenue under IMF directives.
However, the decision has raised concerns, with reports emerging of fraudulent practices by some importers, particularly regarding vehicle shipments from Japan.
The first batch of imported vehicles is expected to arrive between February 25 and 27, with subsequent shipments scheduled through March, covering all vehicle categories.
Authorities assure consumers that there is no need for panic buying, as vehicle imports will continue long-term.
Popular models such as the Suzuki Alto and Wagon R FX will be priced between Rs. 6 million and Rs. 6.5 million, while the Toyota Yaris will start at Rs. 6.5 million. The Toyota Vitz has been discontinued and replaced by the Yaris.
A major controversy erupted when the Sri Lanka Automobile Association in Japan (SLAAJ) filed a complaint with the Import and Export Control Department, alleging that a particular company was attempting to import vehicles manufactured in 2022, violating the restriction on models produced before January 15, 2023.
The complaint claimed that the importer pressured Japanese certification agencies to falsify manufacturing dates, enabling the illegal import of at least 150 vehicles with fraudulent documentation.
SLAAJ has called for these vehicles to be re-exported to maintain compliance with government regulations.
Meanwhile, Sri Lanka has imposed a 50% surcharge on vehicle import duties, applicable for one year from February 1. The general customs duty for vehicles, previously set at around 20%, has been increased to 30%.
Additionally, a revised luxury tax has been introduced, ranging from Rs. 5 to 6 million per vehicle, a higher threshold than before, allowing lower-cost vehicles to escape the tax burden.
In Parliament, SJB Colombo District MP Dr. Harsha de Silva raised concerns over the soaring vehicle prices and their impact on tax revenue.
He questioned the feasibility of the government’s budgetary expectations, citing that President Anura Kumara Dissanayake had projected a substantial revenue boost from vehicle imports.
Dr. de Silva provided alarming examples of price hikes, with a Toyota Raize now costing Rs. 12.2 million, a Toyota Yaris Rs. 18.5 million, and a Toyota Prius an astonishing Rs. 28.9 million.
The MP argued that relying on vehicle imports for revenue generation, particularly amid skyrocketing prices, is an unrealistic strategy.
He urged the government to reassess its tax policies and revenue expectations, warning that the public may struggle to afford vehicles under the new pricing structure.
As Sri Lanka navigates these policy changes, the impact of the tax-heavy import system remains uncertain. While the government hopes to strengthen revenue streams, industry concerns over fraudulent imports and exorbitant prices may pose significant challenges in the months ahead
