Two months after the lifting of the ban, the Finance Ministry says the vehicle import trend is in line with the Government’s expectations and is confident of receiving the expected tax income of nearly Rs. 300 billion.

Speaking to The Sunday Morning, Ministry of Finance Secretary Mahinda Siriwardana stated that around Rs. 300 billion was expected to be raised from excise taxes, Value-Added Tax (VAT), and other taxes on vehicle imports within this year.

“We are expecting a positive outcome,” he said. “I am happy to note that the vehicle import trend is very much in line with expectations.”

Five years after its ban, the relaxing of motor vehicle import restrictions is expected to generate significant tax revenue, supporting the mobilisation of Sri Lanka’s revenue in 2025.

Working as a key step in the country’s post-crisis recovery, it is anticipated that a primary surplus of 2.3% of GDP by the end of 2025 can be achieved through the easing of vehicle import restrictions.

In accordance with the Budget 2025 speech, the bulk of revenue gains are expected to be delivered by the liberalisation of motor vehicle imports that took place on 1 February.

This process is being carefully monitored to ensure that the import of vehicles does not result in undue negative impacts on external sector stability.

Additionally, Budget 2025 estimates Government tax revenue from luxury motor vehicles to be Rs. 36 billion within 2025-2027, with Rs. 10 billion of the revenue estimated for just this year.

Meanwhile, Government tax revenue for luxury motor vehicles for 2024 stands at Rs. 3.01 billion.

Relatedly, the Budget speech added that amendments to the VAT Act No.14 of 2002 included the disallowance of an input tax deduction on capital goods such as machinery, equipment, or vehicles imported for projects where the VAT at the time of import was different.

Further, Sri Lanka has reportedly spent $ 1.9 billion on vehicle imports in 2018 and $ 1.4 billion in 2019. With the total Government external debt as at the end of September 2024 amounting to $ 38.3 billion, the country’s fiscal obligations remain a major concern amidst the allowing of imports.

However, according to statements made by the Central Bank of Sri Lanka Governor in this regard, it was confirmed that payments of Rs. 3-4 billion annually over the next 10 years would be manageable if foreign reserves reached Rs. 7 billion by the end of this year, following the completion of the debt restructuring process.