Colombo, July 7 – Sri Lankan consumers and businesses could soon face even longer delays in receiving goods purchased from overseas online platforms unless the country updates its outdated e-commerce tax regulations.
Thousands of parcels ordered by Sri Lankans from popular international sites such as TEMU, AliExpress, and eBay are currently reported to be stuck at Sri Lanka Customs. This is creating severe disruptions for small businesses that rely on imported goods and frustrating customers across the island.
The Advocata Institute, a respected independent policy think tank based in Colombo, recently highlighted the root cause: a lack of clear and modern rules to handle the surge in cross-border e-commerce shipments.
Until recently, parcels were cleared under a simplified system, with agents paying a fee based on the weight of packages, treating them as personal goods. However, with the sharp rise in online purchases, this system has become unmanageable. Customs has now reverted to strict procedures requiring every parcel to be inspected and classified by individual HS codes, which significantly slows down processing.
By contrast, countries like Australia and Singapore have adopted streamlined systems where online sellers collect applicable taxes at the point of sale and remit them directly to the respective governments. This minimizes congestion at Customs and ensures smoother delivery.
Advocata has proposed that Sri Lanka adopt a similar approach through a Vendor Collection Model (VCM). Under this system, major e-commerce platforms would collect taxes when a customer makes a purchase and pay these to the Sri Lankan government. Low-value items under USD 75 would be exempt, easing the burden on everyday consumers. The rule would apply only to large-scale sellers processing more than 10,000 parcels monthly, safeguarding smaller vendors.
Additionally, these platforms would be required to register in Sri Lanka or appoint a local tax representative, which would further simplify tax administration and relieve pressure on Customs operations.
Advocata warned that without swift reform, popular online platforms may eventually halt shipments to Sri Lanka, limiting consumer access to affordable goods — particularly affecting rural communities and small businesses that depend on these platforms for supplies.
At R&R Partners Sri Lanka, we recognize that the e-commerce landscape is evolving rapidly. It is crucial for businesses to stay informed of these regulatory developments, which can have a significant impact on import strategies, pricing, and customer satisfaction.
We will continue to monitor these policy discussions closely and keep our clients updated. Should you need guidance on how these potential changes might affect your business operations, our team is ready to assist.
