Customs Cracks Down on E-Commerce Loopholes to Boost Revenue

Sri Lanka Customs is preparing to roll out a sweeping new regulatory framework for e-commerce imports, aiming to curb large-scale tax leakages and restore integrity to a sector that has rapidly expanded beyond the capacity of existing monitoring systems. The initiative, expected to be issued within weeks, marks one of the most significant interventions in the country’s digital trade environment in recent years.

Customs Director and Media Spokesperson Chandana Punchihewa confirmed that officials met with several leading e-commerce platforms on 17 November to outline the upcoming rules. He said the exponential growth of online shopping accelerated by widespread smartphone use, digital payments, and global marketplaces has made regulation essential.

According to Punchihewa, the surge in parcel imports following the application of the de minimis rule—which exempted low-value items from duties opened the door for widespread abuse. “We observed that e-commerce imports had become an illegal channel to import goods. Many high-value items were being declared as low-value parcels, causing massive revenue leakage,” he said.

Customs data shows that the misuse of the de minimis provision became so widespread that it distorted legitimate trade flows. Freight forwarders, clearing agents, and some platform sellers allegedly exploited loopholes by splitting high-value consignments into multiple small parcels or misdeclaring values to bypass taxes. With parcel volumes reaching unprecedented levels, the authorities concluded that the system had become unsustainable.

Following the recent removal of the de minimis rule, revenue from e-commerce imports has skyrocketed—quadrupling to nearly Rs. 600 billion in 2025 compared with Rs. 150 billion collected in 2024. This dramatic increase highlights both the scale of previous leakage and the potential for digital trade to be a major contributor to government finances if properly regulated.

Customs insiders note that beyond revenue, the regulatory overhaul aims to improve consumer protection, curb counterfeit goods, enhance border security, and bring informal traders into the formal economy. New measures are expected to include mandatory electronic documentation, verified seller identification, pre-arrival digital data submission, accurate valuation requirements, and closer coordination with courier companies.

Punchihewa noted that the regulations being drafted internally could be issued within two weeks. In parallel, Customs will recommend broader policy reforms to the Ministry of Finance, though these will require ministerial and Cabinet approval and therefore take longer. These may include revised thresholds, uniform tax treatment for online and offline purchases, and mandatory compliance standards for global e-commerce platforms operating in Sri Lanka.

Economists argue that modernising e-commerce governance is critical as Sri Lanka shifts towards a digital-first retail landscape. Stronger oversight can improve tax collection at a time of fiscal strain, while predictable and transparent rules may encourage foreign investment in logistics, warehousing, and digital trade infrastructure.

As Sri Lanka attempts to stabilise its economy, the Customs e-commerce initiative is poised to become a key component of revenue recovery, formalisation of digital trade, and improved monitoring of the country’s rapidly expanding online marketplace.