Sri Lanka Extends the 50% Vehicle Import Duty Surcharge to 31 December 2026

Sri Lanka’s 50% surcharge on customs import duty for motor vehicles was due to lapse in mid-August. It did not. Gazette Extraordinary No. 2501/88 extends it to 31 December 2026, and the exemption that protects older orders dies on a date most dealers have not diarised: 15 November 2026, the last day a vessel can be loaded. The surcharge is not 50% on the price of the car, and the difference between those two readings is the whole story.

What the gazette actually does

On 13 August 2026 President Anura Kumara Dissanayake, acting as Minister of Finance, Planning and Economic Development, issued an order under Section 10A of the Customs Ordinance (Chapter 235), as amended by Act No. 83 of 1988. Published as Gazette Extraordinary No. 2501/88, it extends the 50% surcharge on Customs Import Duty for specified motor vehicles from 15 August 2026 through to 31 December 2026, applying to both General and Preferential duty rates.

This is an extension rather than a new measure. The surcharge was first imposed with effect from 16 May 2026 and was originally set to run for three months, which is why the trade expected it to fall away in the second week of August. It has now been pushed out by a further four and a half months.

It is not 50% on the car

The headline reads as a 50% tax rise and it is being repeated that way. It is not. The surcharge is calculated on the Customs Import Duty payable, not on the value of the vehicle. Where a car attracts a 20% duty, a 50% surcharge on that duty adds 10 percentage points of CIF and produces an effective duty of 30%.

Because duty rates in Sri Lanka vary by HS code, engine capacity and propulsion type, the only honest way to present this is as a mechanism rather than a single number. Find your own duty rate and read across.

Two things this table does not tell you, and neither should be guessed at. The first is whether excise duty, VAT and the other levies in the chain compute on a duty-inclusive base in your case — if they do, the surcharge cascades and the real cost is higher than the row suggests. The second is the excise band itself, which in Sri Lanka has long stepped by engine capacity and moves far more money than the surcharge does. Both are settled per vehicle with Customs, not from a table on a website.

Duty and tax figures here are reported from the cited gazettes and press, and were checked on 18 August 2026. Sri Lanka’s vehicle tax structure has been revised repeatedly and rates vary by HS code, capacity band and propulsion type. Confirm the current position with Sri Lanka Customs for your specific vehicle before committing capital.

The exemption, and the three ways to lose it

Vehicles imported under Letters of Credit established on or before 15 May 2026 — the day before the surcharge originally took effect — are exempt. That exemption is conditional, and the conditions are where dealers will get hurt.

• Amend the LC and you lose it. The surcharge applies if the original Letter of Credit has been amended as to the number of vehicles, the vehicle descriptions, the technical specifications or the expiry dates. A routine housekeeping amendment to extend an expiry date is enough.
• Ship late and you lose it. The surcharge applies where the shipped-on-board date stated on the bill of lading or airway bill falls after 15 November 2026. Not the arrival date, not the clearance date — the date the vessel was loaded.
• Open the LC after 15 May 2026 and it never applied. Anything ordered since the surcharge came in is inside it and always was.

Why 15 November is closer than it looks

A shipped-on-board deadline is not an ordering deadline. Working backwards from 15 November 2026 with the lead times we actually see:

A car bought at auction in Japan in late September, consolidated, cleared for export and loaded, is comfortably inside the window. A car bought in late October is not, because the constraint is not the sailing — it is the queue for a sailing. Roll-on roll-off space out of Japan tightens in the fourth quarter, and a vessel that slips by a week moves your bill of lading past 15 November and reprices the unit.

If you are holding a pre-15 May LC with units still unshipped, the useful thing to do this week is get a written shipped-on-board estimate from your forwarder for each one, and treat anything estimated after 1 November as at risk rather than safe.

The clock that costs more than the surcharge

Dealers focused on the surcharge are watching the smaller number. The Imports and Exports (Control) Regulations published in Gazette Extraordinary No. 2421/04 impose a registration deadline with teeth.

A vehicle imported under those regulations must be registered within 90 days from the date of the Bill of Entry (the Customs Declaration, CUSDEC). Miss it and the importer pays a monthly late fee of 3% of the CIF value, computed non-compounded and linearly, to the Commissioner General of the Department of Motor Traffic at the point of registration. The fee is capped at 45% of CIF, which is reached after fifteen months. Any part-month of fewer than 30 days counts as a full calendar month, and the regulations state that no waiver shall be granted under any circumstances.

Read that against a surcharge worth roughly 10% of CIF at a 20% duty rate and the priority reorders itself. Three months past the 90-day deadline — so roughly six months from clearance — costs 9% of CIF. Five months past it costs 15%. The surcharge is a pricing problem; the 90-day clock is a floor-plan problem, and it is the one that turns slow-moving stock into a loss.

What dealers should do now

• Audit every open LC against 15 May 2026. Sort into exempt and non-exempt. Anything exempt goes on a shipping watchlist.
• Freeze amendments on exempt LCs. Before any change to count, description, specification or expiry, price what losing the exemption costs against what the amendment achieves.
• Get shipped-on-board estimates in writing. Anything after 1 November is at risk. Book the space now rather than in October.
• Reprice non-exempt stock properly. Add the surcharge to the duty line, not to the retail price, and check whether it cascades into your excise and VAT base.
• Put a 90-day date on every CUSDEC. One spreadsheet column. It is the cheapest control in the business and it is the one most dealers do not have.
• Re-check the three-year age rule at purchase. Age runs from the date of manufacture to the date of the bill of lading, so a slipping sailing can age a car out of eligibility as well as out of the exemption.

The full mechanics of the registration clock, the importer-registration categories and the re-export penalty are set out in our Sri Lanka import rules guide for dealers. For how the duty and excise base is actually built, see Sri Lanka vehicle import taxes explained, and for the process end to end, importing a car to Sri Lanka.

Does this affect private buyers?

Yes, but less than the headline implies, and possibly not at all if you are not buying this year.

A private importer buying one car now is inside the surcharge, because no private buyer holds an LC dated before 15 May 2026. What you are paying is an extra slice of duty — roughly 10% of CIF at a 20% duty rate — on top of an excise bill that is very probably larger than the surcharge and is set by your engine capacity band. If you are choosing between two cars, the capacity band will move your total more than the surcharge will.

There is also a rule most private buyers do not know about. An importer not registered with the Department of Motor Traffic as a motor vehicle importer may bring in only one vehicle in any twelve-month period, measured from the date of the Bill of Entry. If you were planning a second car inside a year, that is the constraint to check first.

The one-line version

A dealer in Sri Lanka should read this because a bill of lading dated after 15 November 2026 reprices every unit still sitting on a pre-15 May Letter of Credit.