CMTA pushes for fair and transparent vehicle import processes

Sri Lanka’s vehicle import valuation system needs urgent correction to prevent revenue leakages and restore fairness in the market, the Ceylon Motor Traders Association (CMTA) said, warning that current duty assessment practices are creating structural distortions across the industry.

In a statement, the CMTA called on authorities to recalibrate vehicle valuation and import processes, highlighting the automatic 15percent reduction applied to the CIF value of used vehicle imports when calculating duties as one of the most critical gaps.

The association said duty calculations should apply uniformly, whether a vehicle is imported brand new through an authorised agent or brought in as a so-called used import through a dealer.

To illustrate the imbalance, the CMTA pointed to a scenario where an authorised agent importing a zero-mileage 2026 vehicle at a CIF value of US$ 50,000 is assessed on the full amount, while a dealer importing the exact same model, also zero mileage and identical in specification — can have the CIF value reduced by 15percent to US$ 42,500 simply because the vehicle was registered and de-registered prior to shipment.

“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,” the association said.

The CMTA said such valuation practices distort competition, disadvantage compliant authorised agents and result in significant erosion of import duty revenue to the State.

It also raised concerns over the widespread application of depreciation adjustments, which, when combined with under-declared transaction prices and manipulated valuations, leads to duty being calculated on figures far below actual market value.

These undervalued prices then feed into online platforms and price-tracking websites, creating a distorted reference market that reinforces undervaluation and normalises non-compliant pricing behaviour, the association said.

Another pressing issue flagged was the growing misuse of VAT-free trade-ins in the used vehicle business, where transactions are structured as vehicle-for-vehicle or vehicle-for-asset exchanges to bypass VAT mechanisms and obscure the true transacted value of imports.

Such practices allow vehicles to enter the market with artificially low invoice values, directly impacting the calculation of import duties and other applicable taxes, the CMTA said.

The association said the absence of structured and enforceable processes to accurately verify transacted value has created an environment where valuations vary widely and lack accountability, enabling systemic revenue leakage for the government.

Vehicle imports through CMTA members, which operate within clearly defined and auditable frameworks, demonstrate that transparent valuation and predictable tax collection are achievable, it added, citing accurate invoicing, traceable foreign currency outflows and reliable duty and VAT collection.

The CMTA urged authorities to rigorously enforce existing laws, close gaps in the used vehicle import process, tighten oversight of VAT-free trade-ins, monitor funding mechanisms used for imports and eliminate arbitrary depreciation allowances.

Ensuring all market participants operate under the same legal and regulatory standards would strengthen state revenue, restore confidence in governance and protect compliant businesses, the association said, adding it stood ready to support authorities in implementing practical solutions.