The value of a vehicle is not the key criterion for determining import taxes in Sri Lanka, Deputy Minister of Finance and Planning Dr. Harshana Suriyapperuma clarified in Parliament yesterday during the debate on the Excise (Special Provisions) Act.
Instead, taxes are primarily calculated based on two factors: the type of vehicle and its engine capacity, measured in cubic centimetres (cc). Dr. Suriyapperuma explained that diesel vehicles attract the highest excise duties, followed by petrol vehicles. In contrast, electric vehicles enjoy the lowest tax rates, while hybrid vehicles fall in between—taxed more than EVs but less than petrol and diesel variants.
“We have implemented a more balanced taxation structure to reduce the significant disparities between vehicle types,” the Deputy Minister noted, referencing changes made under a Gazette notification issued on January 31.
Key Revenue Source for Government
Dr. Suriyapperuma emphasized that vehicle-related excise duties remain a major contributor to government revenue. He highlighted that the tax revisions were carried out after careful consideration of economic fundamentals such as foreign reserves and overall revenue needs.
“These decisions weren’t made in isolation. We looked at our foreign reserve targets, import controls, and revenue goals before finalizing the tax structure,” he said.
Supporting Economic Growth Through Development
The funds raised through these taxes are set to be redirected into development projects across the country, with the government aiming to stimulate economic growth through infrastructure investment.
According to Dr. Suriyapperuma, recent fiscal performance indicators show that the country is on track in terms of meeting foreign reserve benchmarks and revenue collection targets, reinforcing the rationale behind the revised vehicle tax policy.