Sri Lanka is yet to finalise on how it will compensate for the government revenue loss from the phased removal of the Cess and PAL paratariffs by 2029, which is to coincide with the introduction of mandatory SLS tyre standards effective from 2027 onwards; raised during a Committee on Public Finance meeting held recently (3).
Speaking of the ongoing phased-out removal of CESS and PAL paratariffs, which Sri Lanka is carrying out with the support of the World Bank, Deputy Minister of Industry and Entrepreneurship Development Chathuranga Abeysinghe said: “With the removal of the CESS and PAL, there will be a revenue loss. We had asked about how this would be compensated in the last meeting with the Ministry of Finance, on this forum. The ministry has a calculated figure, so what we are looking to do is increase exports and compensate for that, with other taxes.”
Sri Lanka’s phased removal of para-tariffs CESS and PAL is part of a major 2026–2029 National Tariff Policy reform, across 2,634 identified Harmonised System (HS) product codes over a four-year window, alongside a shift to a simplified four-tier import duty structure of 0%, 10%, 20%, and 30%.
On 1 October, Sri Lanka published Gazette No. 2508/27, containing the regulation; Imports and Exports (Control) No. 08 of 2026, which make it mandatory for imported passenger car tyres and three-wheeler tyres to comply with Sri Lankan national standards (SLS).
During the meeting, Import and Export Control Department Controller General of Imports & Exports Upulmalee Premathilaka pointed out that Sri Lankan vehicle importers have roughly around 3 months to adjust to the standard, as the Department awaits for the World Trade Organisation to raise its own concerns surrounding the standards.
“We have given a three month grace period, because usually when we put out a Gazette, we send it to the WTO through the Department of Commerce, for them to raise their own concerns, for which they provide objections. This is what is the three-month grace period. We can even extend the grace period depending on the requirement, as there is no legal barrier to that.”
However, according to Sri Lanka Standards Institution (SLSI) Director of Laboratories
Sujeewa Mahagama, Sri Lanka does not have the necessary equipment or facilities to test tyres for mandatory inspections for adherence to the regulation.
“When it comes to testing tyres, there's two aspects to it. One is the dimensional, and the other is the functional factor; which assesses the endurance or distance a tyre can go. Then there’s also the load test and the plunger test. To do those two we need to have equipment. What we can do right now is only the dimensional tests.”
He further confirmed that with the timeline left ahead, testing may not come into force around January of 2027, as outlined in the Gazette for expected compliance. Mahagama also said that though procurement requests for the necessary equipment had been made, the attempts made on part of the SLS had been futile.
“We have already raised procurement requests for this, however these equipment aren’t commercially available.”
The World Bank, in its findings released on Sri Lanka this year noted that of Sri Lanka's average import tariff of 19%, around 11 percentage points come from para-tariffs (PAL and CESS). In partnership with the multilateral, the government plans to complete the phase-out of these two major para-tariffs over four years (2025-2029), which will reduce the average tariff by 9 percentage points.