Sri Lanka vehicle market to face unprecedented price hike if Govt. taxes industry further

• Price increase will affect both individual buyers and  wholesale importers

By Chaturanga Pradeep Samarawickrama   

The prices of all vehicle models in Sri Lanka could  increase beyond affordable limits following the government’s proposal  to impose a 15 per cent tax on vehicles, Vehicle Importers Association  of Sri Lanka (VIASL) Chairman Prasad Manage warned.   

Addressing the media, Manage said the price hikes are expected to take effect after the 2026 budget.   

He explained that vehicle import duties are calculated  based on the value of the vehicle in the exporting country, after  deducting all consumable taxes. Importers currently receive a 15 per  cent discount on the total price, meaning only 85 per cent of the value  is subject to tax. “There is a possibility this 15 per cent discount  could be removed after the budget,” Manage said.   

If the discount is removed, vehicle prices, ranging from the lowest-priced Alto made in Japan to high-end models, are expected to rise  significantly.   

Manage also noted that the government misunderstands the  discount system, believing importers automatically receive a 15 per cent  benefit when importing brand-new vehicles. In fact, the duty is applied  to vehicles manufactured in 2023.   

He urged the government not to remove the discount, which importers have received since 2015.   

The price increase will affect both individual buyers and  wholesale importers. After the proposed tax, a Suzuki Wagon R could increase by around Rs. 400,000, while a Toyota Land Cruiser may rise by at least Rs. 3 million.   

Manage added that the existing imported vehicle market  could also see substantial price hikes. “The government has not made its  final decision on the tax increase, but based on information from  officials, we are making this announcement. We hope it will be included  in the 2026 budget,” he said.   

The government is reportedly aiming to unify the duty  structure for brand-new and used vehicle imports under this tax reform,  he added.