A technical tax revision could quietly push vehicle prices higher, as industry players caution that shifting the Social Security Contribution Tax to the customs stage may significantly increase the final cost to consumers.
A proposed revision to Sri Lanka’s tax system has sparked concern within the automobile sector, with the Sri Lanka Vehicle Importers Association warning of a potential spike in vehicle import taxes. While the government maintains that no new taxes are being introduced, industry representatives argue that a structural change in the Social Security Contribution Tax effectively increases the tax burden.
Responding to recent remarks by Deputy Minister Dr. Anil Jayantha, the Association clarified that under the existing framework, the 2.5 percent SSCL applies to only 50 percent of turnover. In practice, this results in a 1.25 percent tax impact. However, the proposed amendment shifts the tax point from the sales stage to the customs stage, applying the full 2.5 percent to 100 percent of turnover.
More critically, the 18 percent Value Added Tax will now be calculated on top of the revised SSCL component, further compounding the total customs duty. Importers describe this as a layered tax adjustment that may not be easily understood by the general public.
Although the industry had earlier supported collecting SSCL at customs to curb tax evasion, they insist that tax rates were expected to remain unchanged. The government, however, has dismissed fears of a price surge, labeling such claims as misleading.
With the new system scheduled for implementation on April 1, 2026, stakeholders warn that vehicle prices in Sri Lanka could rise significantly.
