Over 1,000 Electric Vehicles Held by Sri Lanka Customs in Potential Rs. 3 Billion Fraud
(Lanka-e-News -28.July.2025, 11.30 PM) A serious scandal has rocked Sri Lanka’s nascent electric vehicle (EV) sector as John Keells Holdings PLC (JKH) — one of the country’s largest and most influential blue-chip conglomerates — finds itself at the centre of a potentially Rs. 3 billion tax fraud investigation tied to the importation of over 1,000 BYD Atto 3 electric SUVs.
Sri Lanka Customs has confirmed the detention of a consignment of over 1,000 electric vehicles at the Port of Colombo. The vehicles, imported under the JKCG Auto brand (a John Keells subsidiary), are now under forensic scrutiny following a dispute over declared motor capacity, which directly impacts the applicable import duty.
At the heart of the controversy is a crucial classification: whether the vehicles possess a 100kW motor — as declared on import documents — or a more powerful 150kW version, which would attract more than double the tax liability per unit.
According to internal Customs memos leaked to this newspaper, the declared motor specification of 100kW placed the vehicle in a duty bracket of approximately Rs. 2.4 million per car. However, recent inspections, backed by independent technical analysis, have raised credible doubts that the vehicles actually feature 150kW powertrains — which would attract Rs. 5.4 million in import duty under the latest revenue codes.
The delta per car? A staggering Rs. 3 million.
The total potential tax loss? Over Rs. 3 billion.
More alarmingly, nearly all 1,000+ units have already been sold and registered with private buyers, some of whom are now being warned they may face retroactive tax charges or even vehicle recalls.
John Keells Holdings — through its auto subsidiary JKCG Auto — has issued a formal statement asserting that the BYD Atto 3 units were imported in full compliance with manufacturer documentation and market-specific configurations.
“The Atto 3 model has region-specific versions. The Sri Lankan variant is tuned to 100kW. This is the same configuration approved in Nepal and Singapore,” the company stated.
However, experts inside Sri Lanka Customs are less than convinced.
One senior official, speaking on condition of anonymity, said:
“We have taken apart one of the imported units. The inverter and motor casing match the global 150kW spec. Even if software limits output, the hardware speaks for itself. It appears to be a deliberate undervaluation for tax advantage.”
The implications go far beyond a mere misclassification. If proven intentional, the act of under-declaring motor capacity amounts to document manipulation under the Revenue Protection Act — a criminal offence.
Sources close to the Department of Public Finance confirmed that a directive has been issued to perform a full audit of all EV import documentation submitted by John Keells Holdings over the past 18 months, including duty payment slips, shipping manifests, and homologation records.
“If this wasn’t a one-off error but a systemic pattern, it would represent one of the largest auto-related tax evasions in Sri Lankan history,” said a source in the Attorney General’s Department.
The case has also exposed a regulatory vacuum in Sri Lanka’s rapidly expanding EV market. Despite EVs now accounting for nearly 25% of new vehicle registrations, the country has no independent vehicle homologation body, nor a certified process to verify declared motor capacity.
This regulatory blind spot has enabled a grey zone where vehicle importers can, in theory, “de-rate” motors through manufacturer letters or rely on unverifiable foreign certifications.
Legal scholars argue that such reliance on foreign declarations — especially when billions in public revenue are at stake — is dangerously irresponsible.
“Without a local standard and KW verification system, the tax base is being gamed,” said Prof. Arjuna Perera, an expert in transport economics. “The law is not equipped to handle deliberate technical ambiguity.”
The Customs Directorate of Revenue Protection has now launched a full forensic investigation into every single BYD Atto 3 imported since 2023, including units already released into the market.
Industry insiders fear that if over 1,000 vehicles are reclassified as having 150kW motors, buyers may be retroactively billed up to Rs. 4 million each — igniting a potential class action or consumer rights crisis.
Already, lawyers representing multiple EV owners are preparing legal defenses, arguing that the tax obligations rest with the importing company, not the end-users who purchased the vehicles in good faith.
The case is sending shockwaves through Sri Lanka’s broader automotive import sector, particularly among CSE-listed conglomerates with exposure to EV imports. The CSE’s All Share Price Index (ASPI) dipped 1.4% on the day news broke, with JKH shares declining 2.7% in intraday trading.
Other companies with parallel EV import pipelines, including Softlogic, Browns, and Abans, have reportedly begun internal reviews to ensure compliance on motor specifications, documentation integrity, and duty declarations.
In Parliament, opposition MPs have seized on the scandal as evidence of regulatory capture and elite impunity.
“The Customs Department must not be used as a revenue arm that cracks down on the small man while turning a blind eye to corporate giants,” said MP Harsha de Silva. “If JKH is found guilty, it must face the full weight of the law - no matter how many boards they sit on.”
Government sources indicated that President Anura Kumara Dissanayake’s administration is considering an emergency policy directive to establish a National EV Homologation Authority, with technical experts, testing labs, and clear enforcement protocols.
The EV scandal involving JKH now presents a three-way policy trap for the government, regulators, and business sector:
1. Tax Fairness: Can the state pursue back-taxes on vehicles already sold without collapsing consumer confidence?
2. Legal Precedent: Will importers be held criminally liable for creative technical declarations?
3. Market Confidence: If confidence in EV pricing and classification collapses, will the sector stall entirely?
“This is more than a customs dispute — it’s an acid test for Sri Lanka’s commitment to clean governance in a clean-energy future,” said automotive analyst Shenal Perera.
For now, the 1,000 detained vehicles remain in limbo at the Port of Colombo, a silent monument to a regulatory scandal that could define Sri Lanka’s auto import policy for the next decade.
What happens next could determine whether the island’s EV revolution accelerates — or derails.
John Keells Holdings PLC, long regarded as a symbol of corporate excellence and good governance, now finds itself under a spotlight it never expected - or wanted.
And as thousands of consumers wait anxiously for clarity, the state has a choice: show resolve - or signal that in Sri Lanka, corporate manipulation always finds a charging station.
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by (2025-07-28 19:47:42)
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