Expect more severe delays if Govt. doesn’t update e-commerce tax rules: Advocata

Colombo, July 7 (Daily Mirror) - Sri Lankan consumers and businesses making purchases from overseas online services could face further delays unless the government updates the country’s outdated e-commerce tax rules, the Advocata Institute has warned. 

Thousands of parcels ordered by Sri Lankans from popular online shopping sites like TEMU, AliExpress, and eBay are currently stuck at Sri Lanka Customs.

Issuing a media release, The Advocata Institute, an independent policy think tank based in Colombo, Sri Lanka, 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.

“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),” the institute said.
This new method is impossible to manage because of the large number of parcels arriving daily, it added.

“Other countries like Australia and Singapore have modern systems where online sellers collect taxes when a customer makes a purchase and send that tax to the government. Sri Lanka doesn’t have this system. Instead, it uses a complicated tariff system with many taxes and exemptions, making it difficult for Customs officers and importers to manage,” it further added.

Providing a possible solution, it said, “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. 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, it added, warning 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” it claimed. 
“This is not just about tax rates,” Advocata said. “It’s about changing how we collect taxes to suit modern online shopping.”