E-commerce stifled Thousands of TEMU, AliExpress, eBay online orders stuck at Customs: Advocata Institute

Says lack of clear rules on how to handle these parcels is causing long delays 

By Chaturanga Pradeep Samarawickrama  

Thousands of parcels ordered by Sri Lankans from popular online shopping sites like TEMU, AliExpress, and eBay are now stuck at the Customs, the Advocata Institute said.  

While issuing a media release, they said a lack of clear rules on how to handle these parcels is causing long delays, affecting small businesses and frustrating customers across the country.   

The Advocata Institute is an independent policy think tank based in Colombo, Sri Lanka. According to the release, the Advocata Institute has warned that unless the government quickly updates the country’s outdated e-commerce tax rules, the situation will only get worse.  

They say delays at the Customs, cause supply chain problems for businesses, and millions in lost tax revenue.  

Until June, parcels were cleared using a simple system where agents paid a fee based on the weight of the package, treating them as personal goods. But as more people started ordering online, this system couldn’t keep up. Customs then decided to follow strict rules and every parcel now needs to be checked and listed by item using HS codes (an international code to classify products).  

Advocata says this new method is impossible to manage due to the large number of parcels arriving daily.  

Countries like Australia and Singapore have modern systems where online sellers collect taxes when a customer makes a purchase and remits the tax to the government. Sri Lanka uses a complicated tariff system with many taxes and exemptions, making it difficult for Customs officers and importers to manage.  

Advocata recommends that Sri Lanka adopt a Vendor Collection Model (VCM), a system already in place in many countries to manage e-commerce taxes more efficiently. Under this model, large online platforms would collect taxes at the point of sale when customers make a purchase, rather than at the Customs point. Low-value items priced under USD 75 would be exempt from this tax, making small, everyday purchases easier for consumers. 

Under this model, large online platforms would collect taxes at the point of sale when customers make a purchase, rather than at the Customs point. Low-value items priced under USD 75 would be exempt from this tax, making small, everyday purchases easier for consumers. 

The rule would apply only to major sellers handling over 10,000 parcels a month, ensuring that smaller vendors are not burdened. Additionally, these platforms would be required to either register within Sri Lanka or appoint a local tax representative to manage tax payments, helping to streamline the process and reduce pressure on Customs operations.  

Advocata warns that if nothing is done, popular online platforms might stop delivering to Sri Lanka. 

This would reduce access to affordable goods for consumers, especially in rural areas, and hurt small businesses that depend on these platforms for supplies.  “This is not just about tax rates,” Advocata said. “It’s about changing how we collect taxes to suit modern online shopping.”  

As e-commerce keeps growing, experts say it is important for Sri Lanka to act quickly to avoid more delays, extra costs and missed opportunities for both businesses and consumers.