Sri Lanka motor trade urges recall of vehicle valuation, import processes

The Ceylon Motor Traders Association (CMTA) this week said Sri Lanka’s vehicle import framework requires urgent recalibration to ensure fairness, transparency, and the protection of state revenue.

The CMTA states that one of the most critical issues that must be addressed is the automatic 15 per cent reduction applied to the CIF value of used vehicle imports when calculating import duties. In a statement, it maintained that duty calculations should be applied uniformly across all importers, whether the vehicle is brought in through an authorised agent as brand new or through a dealer as a used import.

For example, if an authorised agent imports a 2026 zero-mileage vehicle of a particular brand at a CIF value of US$ 50,000, the full value is used for duty assessment. However, if a dealer imports the exact same 2026 model, also zero mileage and identical in specification, but registered and subsequently de-registered prior to shipment, the CIF value for duty purposes is reduced by 15 per cent to $ 42,500. This concession is granted solely because the vehicle is technically classified as “used” due to prior registration, despite there being no practical difference in mileage, condition, or specification between the two vehicles.

The CMTA believes this practice creates a structural imbalance in the market and results in a significant erosion of import duty revenue to the State. When two identical zero-mileage vehicles are assessed at different CIF values purely on the basis of a procedural registration classification, it distorts competition, disadvantages compliant authorised agents, and undermines equitable tax collection. The Association therefore calls for a uniform valuation approach that reflects the true transacted value of the vehicle, regardless of its registration status prior to export.

Compounding this issue is the widespread application of a 15 per cent depreciation adjustment, which further distorts declared values. When combined with under-declared transaction prices and manipulated valuations, duty is calculated on figures that are significantly lower than actual market value. These reduced values are then reflected across various online platforms and price-tracking websites, creating a distorted reference market that reinforces undervaluation and normalises non-compliant pricing behaviour.

One of the most pressing issues confronting the State is the growing misuse of VAT-free trade-ins which certain car sales are supposed to be practicing within the used vehicle business. These transactions, often structured as vehicle-for-vehicle or vehicle-for-asset exchanges in selling an unregistered vehicle and bypass standard VAT mechanisms and obscure the true transacted value of imports. Such practices often allow vehicles to enter the market with lower invoice values, directly impacting the calculation of import duties and other applicable taxes.