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In addition to the customs duty, depending on the article being imported, Sri Lanka has a plethora of levies and duties which are collectable at the point of importation, with each levy having its own applicable rate.
Nevertheless, there are numerous preferential rates, concessions and exemptions available for goods not all of which are apparent at the outset.
The primary enforcement agency with respect to cross border trade is Sri Lanka Customs (Customs).
Sri Lanka adopted the customs valuation rules provided in the General Agreement on Tariffs and Trade in 2003 and therefore uses transaction value as the primary basis for the appraisement of imported goods for customs purposes.
Sri Lanka also relies upon the identification of goods via reference to the Harmonized Commodity Description and Coding System (six digits) and by reference to the National Sub- Commodity Codes (eight digits).
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Customs duty is levied in Sri Lanka upon all goods, wares and merchandise imported to or exported from Sri Lanka.
The primary mode of customs valuation in Sri Lanka is transaction value subject; to specific adjustments mandated under Article 8 of Schedule E of the Customs (Amendment) Act No 2 of 2003. Customs duty ranges from zero to 30 percent under a four band tarriff structure with rates being 0 percent,5 percent,15 percent and 30 percent.
In addition, an importer is also liable to pay:
- VAT - zero to 12 percent of the sum of the Cost Insurance and Freight (CIF) value x 110 percent, customs duty, surcharge, cess, excise duty and PAL
- Excise Duty (special provisions) - A percentage of the sum of CIF value + x % (CIF value + import taxes)
- Cess - zero to 35 percent of 110 percent of CIF value
- Ports and Airports Development Levy - five percent of the CIF value
- Nation Building Tax - two percent of the sum of the CIF value x 110 percent, customs duty, cess, excise duty and PAL
However, the Special Commodity Levy may be imposed on certain commodity items as a composite levy in lieu of all other tax, duty, levy, cess or charge.
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A number of articles are prohibited from being imported into Sri Lanka. Among these are articles considered offensive to a particular religion, Chinese crackers, appliances for discharging gas, articles that may be converted into lethal firearms, pornographic material, weapons, ammunitions, explosives etc. The complete list can be found in Schedule B to the Customs Ordinance. Certain restricted articles may be imported with a license from the respective Minister.
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Customs declarations are required to be lodged with Customs for all consignments, regardless of whether the imported articles are subject to duties or not. However, there is no need to make a formal entry in the case of passenger baggage. A false or untrue declaration will result in a forfeiture of the goods and the imposition of a penalty of thrice the value of the goods.
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Transfer pricing is the subject of increased attention by Customs, which is currently reviewing its policy on the treatment of related party transactions and the effect of the relationship on the transfer price of the goods.
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Subject to certain conditions, and in accordance with the numerous international treaties to which Sri Lanka is a signatory, a number of items may be imported free of duty. For example, exhibit pieces, demonstration units, and articles for repair to be re-exported thereafter. Articles previously exported from Sri Lanka that have not undergone any processing overseas may also be imported free of duty, subject to certain conditions.
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If customs duty has been paid on imported goods and the goods are subsequently re-exported, a sum not exceeding 90 percent of the duty maybe repaid as drawback subsequent to certain conditions being fulfilled.
Customs bonded warehouses are available as a means of deferring import duty and the Director General Customs or an authorized officer may from time to time allow importation of articles which are intended for re-export without payment of import duty.
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Refunds or rebates maybe claimed on the import duty paid on certain items subject to certain terms and conditions prescribed by the Minister, such as materials imported and used in the manufacture of goods which are subsequently exported from Sri Lanka, plant, machinery and equipment used in projects/ventures approved by the Minister and goods produced in Sri Lanka that are subsequently re-imported.
Imports from countries party to the agreements would qualify for preferential duty rates.
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Sri Lanka is signatory to a number of bilateral and multilateral trade agreements.
The former includes imports from India, Pakistan and Bangladesh, with the latter including imports from SAARC, SAPTA, GSTP and Bangkok Agreement countries.
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Certain imports are exempt from customs duty provided that the Director General of Customs is satisfied that they are imported for the specifically exempted purposes and approval has been obtained from the Secretary to the Treasury. These are specified from time to time by parliament.
Board of Investment (BOI) projects related imports are also exempt from import duty.
Concessionary rates of duty are also afforded solely at the discretion of the Director General of Customs so long as they have been prescribed by parliament. These include plant, machinery and equipment related to the agricultural, textile and other export industries.
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Trade & Customs ContactSuresh Perera
Principal
Tel: +94 11 5426 502
Email: sperera@kpmg.com
Sarah Afker
Manager
Tel: +94 11 5426 522
Email: safker@kpmg.com
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