The Ceylon Motor Traders’ Association (CMTA), established in 1919 is the most senior automotive association in Sri Lanka affiliated with the Ceylon Chamber of Commerce, is calling for greater consistency, transparency and fairness in the policies governing the country’s automotive sector, stressing that a sustainable vehicle import framework must ensure a level playing field across the entire industry.

The Association’s concerns come at a time when the automotive sector continues to operate under significant fiscal and regulatory pressures, with recent policy measures, including the introduction of a 50% surcharge on vehicles, adding further complexity to an already challenging market. While the CMTA recognises the Government’s need to manage foreign exchange, generate revenue and regulate vehicle imports responsibly, it believes that such measures must be structured in a manner that does not disproportionately disadvantage legitimate businesses or distort competition between different segments of the market.

At the centre of the Association’s concerns is the continued application of a blanket 15% depreciation on the Cost, Insurance and Freight (CIF) value of used vehicle imports for duty calculation purposes. The CMTA maintains that this mechanism creates an unintended advantage for certain used vehicle imports, particularly when vehicles entering Sri Lanka as used units can be virtually identical to brand-new vehicles in terms of model, specification and, in most cases, mileage.

The Association estimates that the existing depreciation mechanism resulted in approximately Rs. 40 billion in lost to government revenue in 2025 alone. Without corrective action, a similar level of revenue leakage could occur in 2026, representing a significant loss at a time when government revenue remains critical to strengthening public finances and supporting national development.

The issue, the CMTA emphasises, is not about restricting consumer choice or opposing the used vehicle market rather, it is about ensuring that vehicles entering the country are assessed fairly and consistently, based on their actual value and circumstances. When two substantially identical vehicles can attract different levels of taxation simply because one has been registered overseas before being imported, the Association believes the resulting disparity warrants policy reconsideration.

The CMTA argues that the same principle of fairness should also apply when considering the impact of newer fiscal measures, including the recent 50% surcharge. Such a substantial additional cost can have implications across the automotive value chain, affecting vehicle prices, consumer affordability, business viability and the broader ecosystem supporting vehicle sales and after-sales services.

For authorised vehicle importers, the impact extends beyond the initial sale of a vehicle. These businesses invest in showrooms, service centres, technical equipment, training and customer support while employing technicians, engineers, sales professionals and other personnel. They also operate through established and traceable systems, contributing through taxes, duties, EPF, ETF and other statutory obligations.

This broader contribution, the Association says, needs to be considered when developing automotive policy. A regulatory environment that places a disproportionate burden on compliant and transparent businesses, while allowing other segments to benefit from valuation concessions or structural advantages, risks undermining the very ecosystem that supports consumers after they purchase a vehicle.

The CMTA also points to the wider consequences of revenue leakage. Every rupee foregone through an avoidable tax concession represents revenue that could otherwise contribute towards public services, infrastructure and economic development. The Association therefore believes that affordability should not be pursued through measures that arbitrarily favour one category of vehicle over another, particularly where those measures can create substantial losses to the Treasury.

Instead, if the policy objective is to make vehicles more accessible to consumers, the CMTA believes that this should be achieved through a transparent and consistent framework that considers the entire automotive market. Such an approach would allow the Government to balance consumer interests with the need to protect revenue and maintain a sustainable industry.

The Association has previously advocated for a structured depreciation framework based on the actual age of a vehicle rather than a blanket 15% concession. Under an earlier proposal, depreciation would be calculated according to a defined scale and capped at a maximum of 10%, providing a more transparent mechanism that better reflects the actual depreciation of a vehicle while reducing opportunities for misuse.

The CMTA believes this principle remains relevant today. If any concession is to be maintained for used vehicle imports, it should be based on objective criteria such as vehicle age and should apply within a clearly defined and consistently administered framework. Vehicle valuation should ultimately reflect genuine transaction values, ensuring that businesses competing in the same market are subject to equitable treatment.

The Association further stresses that a level playing field is essential not only for businesses, but also for consumers. Brand-new vehicles purchased through authorised channels typically come with manufacturer warranties and structured after-sales support, helping consumers manage maintenance and repair costs during the warranty period. These benefits contribute to longer-term reliability, access to genuine parts and greater peace of mind for vehicle owners.

Against this backdrop, the CMTA is urging policymakers to look at automotive taxation and import regulation from a holistic perspective rather than addressing individual segments in isolation. The objective, it says, should be to create a framework in which brand-new vehicles, used imports, authorised distributors, independent businesses and consumers can participate in a transparent and competitive market.

Such a framework would also help strengthen confidence in the sector by reducing inconsistencies in valuation, limiting opportunities for exploitation and ensuring that taxation is applied according to clear and predictable principles. Greater transparency would benefit government revenue, legitimate businesses and consumers alike.

The CMTA acknowledges the Government’s responsibility to protect the country’s economic interests and manage the challenges associated with vehicle imports. However, it believes these objectives can be achieved without creating unnecessary disparities within the automotive industry.

As Sri Lanka continues to rebuild its economy and strengthen public finances, the Association is calling for automotive policy to be guided by a simple but fundamental principle: fair treatment must apply across the entire industry. Removing unjustified valuation advantages, reviewing the impact of significant new surcharges and establishing transparent rules based on genuine vehicle values would, in the CMTA’s view, provide a stronger foundation for a sustainable automotive sector.

Ultimately, the Association believes that a healthy automotive industry should not be defined by which segment receives the greatest advantage, but by whether every legitimate participant operates under fair, transparent and consistently applied rules. A level playing field, it maintains, is essential to protecting government revenue, supporting responsible businesses and delivering greater value and confidence to Sri Lankan consumers.

Photo Captipn: Seated (L to R): Lakmal De Silva Chief Officer, Vehicle Sales, David Pieris Motor Company (Lanka) Ltd; Mahen Thambiah, Chairman, Kia Motors Lanka Ltd.; Gahanath Pandithage, Managing Director, Diesel & Motor Engineering PLC (DIMO); Andrew Perera, Chairman, Ceylon Motor Traders Association (CMTA.; Nalin Welgama, Chairman, Ideal Motors (Pvt) Ltd.; Charaka Perera, Group Chief Operating Officer, United Motors Lanka PLC; Tarindra Kaluperuma, Director, Stafford Motors (Pvt) Ltd.; and Jawahar Ganesh, Group Managing Director, Associated Motorways (Private) Limited