The cost of purchasing a vehicle in Sri Lanka has surged dramatically due to recent tax amendments on imported fuel and electric vehicles. The minimum price of a car that an average citizen can afford is now expected to exceed Rs. 5 million, according to vehicle importers.
Under the new tax regulations, introduced through an extraordinary gazette notification effective from January 11, vehicles less than 10 years old are now subject to excise duties ranging from 200 to 300 percent based on engine capacity and lifespan. These duties are part of a broader effort by the government, led by the President in his role as Minister of Finance, to increase state revenue.
Economic analysts note that these excise duties are not the only costs to be imposed. Additional charges include Value Added Tax (VAT) and taxes on cost, insurance, and freight (CIF). Combined, these taxes will raise the prices of imported vehicles significantly, with some models seeing their prices more than double.
For example, a Wagon R, which was previously considered a relatively affordable car, is expected to cost Rs. 7 million. A Toyota Aqua will now exceed Rs. 10 million, while a Toyota Prius is projected to cost over Rs. 20 million. Vehicles with engine capacities of 1500 CC will incur more than Rs. 2 million in excise duty alone, and those with 1000 CC engines will face over Rs. 1 million in excise duty.
Vehicle importers have expressed frustration, stating that while excise duties are increased annually, the government has yet to lift the ban on vehicle imports, which has been in place since 2020. They argue that without clear policies, these tax hikes only inflate vehicle prices without addressing the underlying shortage of imported vehicles.
Economic analysts have emphasized that any decision to lift the vehicle import ban will require new legislation and approval from the Cabinet. They warn that even if the ban is lifted, the combination of excise duty, VAT, and other taxes will push vehicle prices to levels that may remain unaffordable for most citizens.
As a result, vehicle importers predict that even second-hand vehicles will maintain or increase their current high prices, further straining the budgets of ordinary Sri Lankans. This situation has fueled widespread concern among prospective buyers and the broader public, with many questioning the accessibility of vehicle ownership in the current economic climate.
The latest tax amendments are part of broader economic reforms aimed at addressing Sri Lanka’s financial challenges, but they have also intensified debates over affordability and accessibility in the automotive market. For now, vehicle ownership for many Sri Lankans remains a distant dream.
