Sri Lanka’s Finance Minister Mangala Samaraweera today (Wednesday 13) clarified a revision of excise duty and implementation of a luxury tax on motor vehicles that will be effective from 6th March 2019.
Minister Samaraweera told a media conference in Colombo that the luxury tax proposed in 2019 budget will be imposed on very high-end imported vehicles with CIF value of over Rs 3.5 million.
One of the people’s main eye catching proposals in 2019 budget was the tax increase of vehicles.
Taxes were increased for small vehicles to affordable level and a new tax system was introduced for Luxury vehicles with CIF value above Rs. 3.5 Million, he said.
The vehicle taxes introduced in the budget will only apply to LCs opened on March 06 or after, he said adding that there was no truth in various rumors being spread claiming that the taxes will also be imposed on LCs opened before that date.
He said that in 2018 there was flooding of vehicles into the country resulting on pressures on the exchange rate due to outflow of foreign reserves. In order to prevent this situation by curtailing vehicle imports the Central Bank announced a 200% cash margin for LCs on September 28 to restrict vehicle imports.
The government has removed the 200 percent cash margin when opening Letters of Credit to import vehicles heeding to representations made by motor traders, he disclosed.
Motor Traders expressed concern on the Finance Ministers failure to mention the exact date of removing the 200 percent cash margin requirements on motor vehicle imports as he pledged to remove it in the near future during his budget speech.
The imposition of 200 percent cash margin was against the General Agreement on Tariffs and Trade (GATT), they claimed expressing their rejoice over the removal of this heavy burden for them.
Excise duty on the hybrid and electric vans will be revised to reflect the energy efficiency benefits while the excise duty on buddy trucks with cargo carrying capacity less than 2,000 kg will be reduced.
As per the budget proposals, the excise duty on the single cabs and passenger vehicles will also be revised.
Sri Lanka Motor traders has urged the government reconsider the imposition of a new luxury tax on vehicles and customs duty hike in petrol and hybrid vehicles from the 2019 budget.
The Vehicle Importers Association of Sri Lanka (VIASL) says that vehicle tax increase will be jacking up prices at unaffordable level for buyers hitting the business of car importers badly.
VIASL Chairman Ranjan Peiris told a media conference in Colombo recently that “A sum of Rs.1.24 million, would have to pay as a luxury tax for a vehicle with a 1,000cc engine capacity in addition to the manufacturing cost.
He added that car permit holder has to pay the luxury tax depending on the model of vehicle, he revealed.
Prices of Toyota Premier, Toyota Axio, Honda Vezel, Toyota CHR and Honda Grace fall under the luxury tax category will go up to very high level making it impossible for normal buyers buy such vehicles, he claimed.
Revision of excise duty on motor vehicles and implementation of luxury tax on luxury motor vehicles is expected to generate revenue of Rs.48 billion this year.
Motor traders urged the Finance Ministry to revise this tax as it will compel them to stop imports of such vehicles and the government will lose valuable tax revenue.