Photo Caption: 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
The Ceylon Motor Traders’ Association (CMTA), the senior-most automotive association in Sri Lanka affiliated with the Ceylon Chamber of Commerce, is urging the Government to take decisive action in the upcoming national budget to abolish the 15% depreciation concession granted on used vehicle imports, in order to address significant government revenue losses and establish a unified tax structure across the automotive sector.
Despite the issue being raised through previous budget proposals submitted via the Ceylon Chamber of Commerce, the necessary policy change remains outstanding. With the upcoming budget presenting another opportunity to address this long-standing concern, the CMTA stresses that the Government urges to prioritise the matter this year to safeguard public revenue, eliminate existing market distortions and ensure a fairer, more transparent vehicle taxation system in the country.
The Association estimates that government revenue leakage arising from the current depreciation mechanism amounted to approximately Rs. 40 billion in 2025, rising to an estimated Rs. 120 billion by September 2026. This substantial increase highlights the urgency of addressing the issue, as continued revenue losses place further pressure on public finances at a time when government revenue is critical to supporting economic recovery, national development and essential public services.
Under the existing system, used vehicles receive a 15% depreciation on their Cost, Insurance and Freight (CIF) value when calculating import duties. However, many vehicles entering Sri Lanka through the used vehicle market are virtually zero-mileage units, with CIF values comparable to those of brand-new vehicles. The CMTA argues that applying a blanket depreciation concession in such circumstances creates an unjustified tax advantage for used vehicle imports, despite the limited difference in the underlying value of the vehicles, while significantly impacting on the revenue collected by the State.
The CMTA maintains that abolishing this concession should form part of a broader effort to establish a unified and equitable tax structure for vehicle imports. A consistent approach to taxation would help eliminate preferential treatment between market segments, reduce opportunities for misuse and create a more transparent and predictable operating environment for importers, consumers and the Government.
The Association also calls on the authorities to strengthen oversight and take decisive action against those exploiting the existing framework for personal gain. Closing loopholes and addressing practices that undermine the intended application of import duties are essential to protecting government revenue and maintaining the integrity of Sri Lanka’s automotive trade.
While recognising the importance of vehicle affordability, the CMTA emphasises that this objective should not be pursued through selective tax concessions that distort the market and impose a significant cost on the Treasury. If reducing the cost of vehicle ownership is a policy priority, the Association believes that any such measures should be considered within a broader, consistent taxation framework rather than through benefits that favour one category of vehicle imports over another.
The Association further notes that buyers of brand-new vehicles benefit from manufacturer warranties, which can help reduce maintenance and repair expenses during the warranty period. This offers consumers additional assurance regarding reliability, after-sales support and the potential cost of ownership, factors that should also be considered when evaluating policies affecting the new and used vehicle markets.
The CMTA has previously advocated a more structured approach to depreciation, including a framework proposed as far back as 2013 and then continuously proposing same to every government up to date, under which depreciation would be determined according to vehicle age rather than applied as a flat-rate concession. The proposal envisaged a defined scale with depreciation capped at a maximum of 10% providing a more transparent and equitable basis for calculating vehicle import duties.
While the Association continues to advocate the abolition of the existing 15% concession, it maintains that, should the Government decide to retain a depreciation mechanism, it must be based on a clearly defined and consistently applied framework that reflects vehicle age and is subject to a reasonable cap. Such an approach would help minimise arbitrary tax advantages while improving transparency and protecting state revenue.
As the Government prepares its upcoming budget, the CMTA reiterates that this issue requires urgent attention and can no longer be deferred. Addressing the depreciation concession and establishing a unified vehicle taxation structure would represent an important step towards reducing revenue leakages, strengthening public finances and ensuring a level playing field across Sri Lanka’s automotive sector.
The Association therefore urges the Government to act decisively in the upcoming budget by abolishing the 15% depreciation concession on used vehicle imports and introducing a fair, transparent and unified taxation framework. With the issue having remained unresolved despite previous representations, the CMTA stresses that the forthcoming budget must provide a clear policy direction and deliver the corrective action needed to protect government revenue and support a more equitable automotive market.
