The Ceylon Motor Traders Association (CMTA) has called for an urgent review of Sri Lanka’s vehicle import and valuation framework, warning that existing practices are distorting competition and eroding state revenue.
In a statement, the association said the current system requires “urgent recalibration” to ensure fairness, transparency, and proper tax collection. At the center of its concerns is the automatic 15% reduction applied to the Cost, Insurance and Freight (CIF) value of used vehicle imports when calculating import duties.
Under current practice, duty on brand-new vehicles imported by authorised agents is calculated on the full CIF value. However, if a dealer imports an identical vehicle that has been registered and subsequently de-registered prior to shipment, it is classified as “used,” triggering a 15 percent reduction in the CIF value for duty assessment.
The CMTA cited an example where a 2026 zero-mileage vehicle imported at a CIF value of $ 50,000 is assessed at full value when brought in by an authorised agent. The same model, with identical mileage and specifications but technically classified as used due to prior registration, would be assessed at $ 42,500 for duty purposes.
The association said this differential treatment creates a structural imbalance in the market and results in significant revenue loss to the State. It argued that duty should be applied uniformly based on the true transaction value, regardless of prior registration status.
The CMTA further stated that the widespread application of a 15% depreciation adjustment compounds the issue. Combined with under-declared transaction prices and manipulated valuations, import duties are calculated on figures significantly below actual market value, it said.
According to the association, these reduced valuations are often reflected in online listings and price-tracking platforms, contributing to distorted market benchmarks and reinforcing undervaluation practices.
The CMTA also raised concerns over the alleged misuse of VAT-free trade-in transactions within segments of the used vehicle market. It said such arrangements, including vehicle-for-vehicle or vehicle-for-asset exchanges involving unregistered vehicles, can bypass standard VAT mechanisms and obscure the true transaction value.
The association noted that inconsistent enforcement and weak verification mechanisms have allowed valuation practices to vary widely, creating scope for revenue leakage.
It said vehicle imports handled through CMTA members operate within auditable frameworks that provide accurate invoicing, traceable foreign currency outflows, and proper duty and VAT collection.
The CMTA urged authorities to strictly enforce existing regulations, introduce structured valuation protocols, strengthen oversight of VAT-free trade-ins, and eliminate arbitrary depreciation allowances. It said these measures are necessary to restore market balance, ensure equitable tax collection, and maintain regulatory integrity in the vehicle import sector.