Govt. clarifies no new tax on e-commerce

Treasury Secretary Dr. Harshana Suriyapperuma 

•  Treasury Secretary Dr. Harshana Suriyapperuma expresses openness to explore ‘de minimus’ process
• Describes move as revenue protection measure
• Reveals e-commerce platforms falsely claimed B2B status to dodge taxes
• Notes Customs now using HS codes to correctly classify and tax goods
• Industries Deputy Minister Chathuranga Abeysinghe admits gaps in B2C e-commerce regulations
• Suggests simplifying “green channel” or fairer B2C tax

By Charumini de Silva

Treasury Secretary Dr. Harshana Suriyapperuma yesterday clarified that the Government  has not imposed any new tax on e-commerce transactions, whilst expressing willingness to explore a ‘de minimus’ system, similar to that used in many countries.

 Responding to questions from journalists at a media briefing, he addressed public concerns stemming from confusion over recent Customs procedures for importing small parcels through e-commerce platforms and clarified that these measures were introduced to protect Government revenue.

He said the Treasury is currently focused on identifying and plugging revenue leakages across State institutions to protect the country’s fragile economy as it recovers from a severe downturn. “As part of that process, we have instructed State agencies to report to us on any revenue leakages and to take corrective measures,” he said. 

Dr. Suriyapperuma revealed that it was through this reporting mechanism that Sri Lanka Customs flagged the misuse of concessions previously granted to certain e-commerce operators. He explained that some platforms have claimed to operate under business-to-business (B2B) models, while in reality handling business-to-consumer (B2C) transactions, thereby avoiding proper taxes and benefitting from loopholes.

“Certain groups abused the benefits that were intended for individuals and took advantage of the system,” he claimed, adding that the Customs has now implemented the Harmonised System (HS) code-based classification to correctly value and tax these imports. 

According to him, the corrective measure, which uses the HS code classification of goods, is intended to better match items to their true market value and characteristics. 

“As a country recovering from a major economic downturn, we cannot allow such revenue leakages and regulatory loopholes to go unaddressed,” Dr. Suriyapperuma stressed.

He said the Customs has been actively looking into options to introduce certain thresholds on this front similar to other countries through a process known as ‘de minimus.’ “Some countries have clear thresholds and defined mechanisms to manage them. We are positively considering suggestions like this — in fact, we have received many of them and we are carefully evaluating our options. I’m confident that collectively, we will identify a solution, particularly by leveraging the data now being built on groups that have abused the system in the past to bring in commercial quantities,” he added.

However, Dr. Suriyapperuma said the challenge is the current situation in Sri Lanka, where the economy is just emerging and moving back onto a growth trajectory. “We want to maintain that momentum and continue to provide the necessary facilitation across the country,” he stressed.

The Treasury Secretary called on industries and stakeholders to cooperate and provide input to support fair and transparent revenue collection systems to secure the country’s financial stability and growth.

Separately, Industries Deputy Minister Chathuranga Abeysinghe acknowledged shortcomings in the country’s cross-border e-commerce policy. 

Speaking to journalists, he admitted that the lack of proper regulatory framework for B2C transactions has contributed to the current controversy over Customs duties on imported parcels. “Successive Governments had failed to adequately address the regulatory requirements in B2C cross-border e-commerce despite its rapid growth,” he said. 

Abeysinghe explained that while e-commerce happens through both B2B and B2C channels, platforms and vendors have taken advantage of the regulatory shortcomings introduced around 2017-2018; bringing in goods through B2C transactions without proper taxes or HS codes—whilst relying instead on a weight-based system.

“Temu, which is a B2C platform, has used it to send goods even for B2B and that is unacceptable for us as a country. There is no fairness in how these goods were processed, avoiding due taxes to the Government,” he added. 

The Deputy Minister said the AliExpress e-commerce platform was mostly used to bring down technology-based items, whilst Temu was used mostly to import products that were used for personal use, but non-essential items. 

“Against this backdrop, the Customs therefore resorted to classifying those imports and fed information into the ASYCUDA system, which imposed a higher tariff—leading to public frustration over sudden spikes in costs,” he elaborated. 

Abeysinghe expressed hope that the Finance Ministry and Sri Lanka Customs will resolve it soon.

Outlining potential pathways to fix the issue; he suggested either simplifying the existing “green channel” system, which he acknowledged is currently complex, or applying a lower simplified tax for B2C goods that would avoid burdening consumers. 

He also opined the need to study global best practices and adopt new laws and regulations to modernise Sri Lanka’s cross-border e-commerce framework.