Sri Lanka’s Parliament has ratified a resolution under the Customs Ordinance, along with two orders associated with the Sri Lanka Export Development Act, marking the formal implementation of a comprehensive tariff reform aimed at enhancing and liberalizing the country’s trade framework.
The legislative body endorsed the resolution based on the Customs Ordinance (Chapter 235), as published in Extraordinary Gazette No. 2478/03, and also approved two related orders concerning para-tariffs found in Extraordinary Gazette Nos. 2478/04 and 2479/38 under the aforementioned Export Development Act.
Deputy Minister of Economic Development, Nishantha Jayaweera, informed Parliament that these tariff revisions have already positively impacted government revenue. From April 1 to May 15, 2026, customs import duty revenue soared to 39 billion rupees, a significant increase from 24 billion rupees during the same timeframe in 2025.
This revenue growth can be attributed to the recent introduction of a new four-tier National Tariff Policy on April 1, which superseded the previous three-tier structure of 0%, 15%, and 20%. The revised tariff framework organizes import duties into four categories: 0%, 10%, 20%, and 30%, in line with the United Nations’ Broad Economic Categories (Revision 5).
Approximately 8,225 HS Codes are affected by this tariff reform. Under the new classifications, 3,056 codes for essential goods, medicines, and machinery will be taxed at 0%. Meanwhile, 406 codes for basic industrial and intermediate goods are subject to a 10% tariff, 2,195 codes are assigned a 20% rate, and 582 codes, which include luxury items and those that can be manufactured domestically, will incur a 30% duty. Additionally, mixed rates apply to 411 codes, while 875 codes will maintain their existing rates.
“Our main objective is to simplify the tax policy, which will enhance transparency and remove para-tariffs that have hindered our ability to enter into international trade agreements,” stated Jayaweera.
In conjunction with these tariff modifications, the government is also working to phase out the CESS duty over four stages, with a goal of entirely eliminating para-tariffs by 2029. Although 37 HS Codes will now incur new CESS duties, 17 codes related to edible oils will see their CESS eliminated altogether.
The phase-out plan encompasses five categories. For 46 economic-rate HS Codes, CESS will be completely abolished in 2026. Meanwhile, for 693 intermediate and capital goods codes, the CESS will be cut by 50% in 2026, then by 25% in both 2027 and 2028. Additionally, 107 specific codes will experience a gradual phase-out of CESS by 25% in 2027, another 25% in 2028, and a final 50% reduction in 2029. Moreover, CESS on 265 textile codes will be removed in 2026, coinciding with the introduction of a new import VAT, while 1,523 consumer goods will see complete CESS elimination by 2029.
“The abolition of CESS duties on intermediate goods will directly reduce the cost of raw materials. This will create a more favorable export environment for our local businesses,” Jayaweera remarked.
