Sri Lanka Import Tax

Sri Lanka, officially known as the Democratic Socialist Republic of Sri Lanka, is an island nation located in South Asia, in the Indian Ocean. With a strategic location close to major international shipping routes, Sri Lanka plays a key role in regional trade. As a member of the World Trade Organization (WTO) and a participant in several bilateral and multilateral trade agreements, Sri Lanka has a well-structured import tariff system to regulate the flow of goods into the country.

The Sri Lankan tariff system is managed by the Sri Lanka Customs and is aligned with the Harmonized System (HS) codes, which categorize products for tariff purposes. The country’s tariff rates can vary depending on the type of product being imported, its country of origin, and any special trade agreements in place. In addition to general duties, Sri Lanka imposes specific taxes, including Value Added Tax (VAT) and Nation Building Tax (NBT), on many imported goods.

Sri Lanka’s Import Tariff System

Sri Lanka’s import tariff system is structured to encourage the import of essential goods while protecting local industries. Import duties and taxes are applied to most goods entering the country, though preferential tariffs exist for goods imported from countries with which Sri Lanka has free trade agreements (FTAs) or special trade arrangements.

General Structure of Sri Lanka’s Customs Tariffs

Sri Lanka’s tariffs are based on the HS (Harmonized System) of classification for international trade. The Sri Lankan Customs Department uses this system to determine duties based on product categories. The key components of the Sri Lankan import tariff structure are as follows:

• Basic Import Duty: This is the standard duty rate applied to most imported goods, calculated as a percentage of the product’s customs value (CIF: Cost, Insurance, and Freight).
• Value Added Tax (VAT): A VAT of 8% is typically applied to most goods imported into Sri Lanka, including both commercial goods and personal imports. Certain goods like medicines and educational materials are exempt from VAT.
• Nation Building Tax (NBT): A 2% tax is applied to the value of all imported goods, except for certain exemptions like foodstuffs, agricultural products, and essential goods.
• Ports and Harbour Charges: Additional charges may apply for goods imported through ports, depending on the nature of the product and its volume.

Additionally, there are Special Import Duties (SID) and Excise Duties on certain goods considered non-essential or luxury items, such as alcohol, tobacco, and motor vehicles.

Import Duty Rates by Product Category

1. Agricultural Products

Agricultural imports are essential for Sri Lanka’s food security, but they are subject to varying import duties depending on the product. In general, the Sri Lankan government protects its domestic agricultural industry with higher import duties on agricultural goods that are locally produced.

• Cereals (HS code 10):
  • Wheat: 15% duty
  • Rice: 0% duty for imports through special government schemes; 25% for regular imports
  • Sri Lanka’s rice tariffs are generally high to encourage local production, though rice imports are allowed in cases of supply shortages or special government allocations.
• Fruits and Vegetables (HS codes 07, 08):
  • Apples: 25% duty
  • Oranges: 15% duty
  • Tomatoes: 30% duty
  • Potatoes: 10% duty
  • Import duties on fruits and vegetables are designed to protect local farmers, especially those producing high-demand items like tomatoes and potatoes.
• Meat and Poultry (HS codes 02, 16):
  • Beef: 15% duty
  • Pork: 10% duty
  • Chicken: 10% duty
  • Tariffs on meat imports are moderate, with 10% to 15% duties depending on the product. Imports of meat from countries with which Sri Lanka has bilateral agreements may benefit from preferential rates.
• Dairy Products (HS code 04):
  • Milk Powder: 15% duty
  • Cheese: 20% duty
  • Butter: 20% duty
  • Dairy products face moderate tariffs, though these products are still heavily imported due to Sri Lanka’s insufficient domestic production capacity.

2. Textiles and Apparel

Sri Lanka is known for its strong textile and garment manufacturing industry. As a result, the country imposes tariffs on textile imports to protect local manufacturers, but imports are also essential for the production of finished apparel.

• Textile Fabrics (HS codes 52, 54):
  • Cotton Fabrics: 12% duty
  • Wool Fabrics: 10% duty
  • Synthetic Fabrics: 15% duty
  • Tariffs on fabric imports vary depending on the material, with synthetic fabrics generally being taxed higher than cotton fabrics.
• Apparel (HS codes 61, 62):
  • Shirts: 20% duty
  • Jeans: 20% duty
  • Dresses: 25% duty
  • Finished apparel products typically attract 20% to 25% import duties. However, Sri Lanka’s export-oriented garment industry has led to a greater focus on importing raw materials, such as textiles, at lower rates to support manufacturing.
• Footwear and Accessories (HS code 64):
  • Leather Boots: 30% duty
  • Synthetic Footwear: 25% duty
  • Handbags: 15% duty
  • Footwear and accessories are subject to higher import duties, particularly leather products.

3. Electronics and Electrical Equipment

Sri Lanka imports a wide range of electronic goods, including consumer electronics, industrial equipment, and electrical machinery. The import duties on these products are relatively low compared to other categories.

• Mobile Phones and Computers (HS code 85):
  • Mobile Phones: 0% duty
  • Laptops/Computers: 0% duty
  • Tablets: 0% duty
  • As part of its efforts to support digital transformation and technological growth, Sri Lanka applies 0% duty to most electronic products, including mobile phones and computers.
• Home Appliances (HS codes 84, 85):
  • Refrigerators: 15% duty
  • Air Conditioners: 10% duty
  • Washing Machines: 20% duty
  • Appliances such as refrigerators and washing machines attract moderate duties, generally around 15% to 20%, reflecting their essential status in daily life.
• Electrical Machinery (HS codes 84):
  • Generators: 5% duty
  • Motors: 5% duty
  • Transformers: 10% duty
  • Electrical machinery, including items used in industry, is subject to low import duties to promote the growth of Sri Lanka’s manufacturing sector.

4. Automobiles and Auto Parts

Sri Lanka has a significant automobile market, with both locally assembled and imported vehicles. The import duties on automobiles are high to protect the local vehicle assembly industry, although this varies depending on the type of vehicle.

• Motor Vehicles (HS code 87):
  • Passenger Cars: 50% duty
  • Electric Vehicles: 10% duty
  • Motorcycles: 10% duty
  • Passenger cars face substantial tariffs, typically 50%, while electric vehicles benefit from reduced tariffs of around 10% to encourage eco-friendly transportation.
• Automotive Parts (HS code 87):
  • Engines: 5% – 10% duty
  • Transmission Parts: 5% duty
  • Suspension Parts: 5% – 10% duty
  • Automotive parts generally attract lower duties than finished vehicles, with rates ranging from 5% to 10% depending on the type of part.

5. Chemicals and Pharmaceuticals

Chemicals and pharmaceuticals are crucial to Sri Lanka’s economy, particularly for industries such as agriculture, pharmaceuticals, and manufacturing. These products are generally subject to low or moderate tariffs, although certain chemicals may have higher duties.

• Medicinal Products (HS code 30):
  • Pharmaceuticals: 0% duty
  • Sri Lanka applies 0% duty on most medicinal products to ensure the affordability of healthcare.
• Chemicals (HS codes 28-30):
  • Industrial Chemicals: 5% – 10% duty
  • Agricultural Chemicals: 10% duty
  • Chemical imports for industrial use or agriculture generally face moderate duties of 5% to 10%.

Special Import Duties and Exemptions

In addition to standard tariffs, Sri Lanka applies special duties and exemptions for certain products and under specific conditions.

1. Preferential Tariffs Under Free Trade Agreements (FTAs)

Sri Lanka has entered into several FTAs with countries and regional groups, which allow for preferential tariffs and reduced duties on goods imported from these countries. Notable FTAs include:

• Sri Lanka-India Free Trade Agreement (SI-FTA): Products like textiles, tea, and pharmaceuticals benefit from reduced or zero tariffs.
• Sri Lanka-Pakistan Free Trade Agreement (PAK-SLFTA): Offers preferential tariffs for a variety of products, including agricultural goods, textiles, and chemicals.
• Asia Pacific Trade Agreement (APTA): Members of the APTA, including China, India, and South Korea, enjoy preferential treatment for a range of goods.

2. Anti-Dumping and Safeguard Measures

Sri Lanka applies anti-dumping duties on goods that are being imported at unfairly low prices and threaten domestic industries. Additionally, safeguard measures may be implemented to protect local producers from a surge in imports of certain products.

• Steel Products: Anti-dumping duties may be applied to steel imports from countries like China or Russia if they are found to be underpriced.
• Textiles: Certain textile products from Bangladesh or Vietnam may face safeguard measures to protect Sri Lanka’s local garment sector.

3. Exemptions and Reductions

• Personal Effects: Goods imported by individuals for personal use may be exempt from duties or eligible for reduced duties under specific conditions.
• Charitable Donations: Goods imported for humanitarian purposes may also be exempt from import duties.

Country Facts: Sri Lanka

• Formal Name: Democratic Socialist Republic of Sri Lanka
• Capital: Colombo (administrative), Sri Jayawardenepura Kotte (legislative)
• Largest Cities:
  • Colombo
  • Kandy
  • Galle
• Per Capita Income: Approximately $4,100 USD (as of 2023)
• Population: Around 22 million
• Official Language: Sinhala, Tamil
• Currency: Sri Lankan Rupee (LKR)
• Location: Sri Lanka is an island nation located in the Indian Ocean, south of India.

Geography

Sri Lanka is a tropical island with a diverse geography. Key features include:

• Mountains: The central region of the island is mountainous, with the highest peak being Pidurutalagala at 2,524 meters.
• Rivers: Sri Lanka has several rivers, including the Mahaweli River, which is the longest in the country.
• Coastline: The island is surrounded by beaches and coastal areas, making it a hub for tourism and shipping.

Economy

Sri Lanka has a mixed economy, with agriculture, manufacturing, and services playing important roles. The country is known for:

• Agriculture: Key crops include tea, rubber, and coconut. The country is a major exporter of Ceylon tea.
• Manufacturing: Textiles and apparel are major export sectors, as are gemstones and precious metals.
• Tourism: Tourism is a growing sector, driven by Sri Lanka’s rich cultural heritage, wildlife, and beaches.
• Services: The service sector, including finance and IT, is expanding rapidly.