Edible oil tax reform triggers industry and consumer concern
Sri Lanka’s latest overhaul of taxes on imported edible oils has drawn sharp opposition from coconut oil producers and consumers, who say the move could create an unstable market and undermine several important reforms implemented over the last few years.
The key issue at stake is the government’s decision to completely eliminate the Special Commodity Levy (SCL) and replace it with a percentage-based tax system.
The SCL, which has been in effect for nearly five years, levied a fixed tax on imported coconut oil, palm oil, and sunflower oil regardless of the declared value of imports.
The National Movement for Consumer Rights Protection (NMCRP) has warned that the budget 2026 proposal to remove the SCL on coconut oil and palm oil could lead to serious market and health-related consequences.
NMCRP chairman Ranjith Vithanage told the Sunday Times Business that the proposed decision carries a high risk of coconut oil being mixed with harmful oils before entering the local market.
At the moment, import of raw coconut oil is subject to a flat rate of Rs.150,000 per tonne, while raw palm oil is charged Rs. 250,000 per tonne.
However, with the new measure, this will be abolished and replaced with the imposition of customs duty, a cess of 20 per cent, a Social Security Contribution of 10 per cent, an additional levy of 2.5 per cent, and a value added tax of 18 per cent, as proposed in the budget 2026.
While the Finance Ministry says the proposed reform is a rationalisation of import taxes, edible oil industry experts have pointed out that in reality, the effect would be grossly disparate.
Coconut oil, which is sold at a much higher price in the global market, would be subjected to a much heavier tax burden than palm oil, they pointed out.
The market price of coconut oil is in the region US$ 2,280 per metric tonne, while the price of palm oil is $ 1,090 at present
Taking into account international market prices, it is estimated that the total tax liability of importing coconut oil, including VAT, will be around Rs. 420,000.
Similarly, the total tax liability of importing palm oil, including VAT, will be around Rs. 200,000.
This is a major shift from the current system, where the tax liability of importing coconut oil will almost triple, while the tax liability of importing palm oil will be reduced substantially several edible oil producers and importers said.
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