The government has controversially reduced duties on racing cars while increasing excise duty on small cars with engine capacity of less than 1000cc through last week’s budget – a fact that was not disclosed by President Mahinda Rajapaksa during his speech. Many people said this has shattered the dream of Sri Lanka’s middle income earners [...]

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The Sundaytimes Sri Lanka

Will racing cars overtake Marutis?

By Bandula Sirimanna
Lamborghini costs around Rs.120 million with tax
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The government has controversially reduced duties on racing cars while increasing excise duty on small cars with engine capacity of less than 1000cc through last week’s budget – a fact that was not disclosed by President Mahinda Rajapaksa during his speech. Many people said this has shattered the dream of Sri Lanka’s middle income earners in owning a small vehicle with the Maruti 800, said to be the cheapest small car, going up by at least Rs 200,000. However this won’t affect small car – the Micro Panda – produced by Sri Lanka’s own Micro Cars Ltd because the tax doesn’t affect locally assembled vehicles. The Panda now costs around Rs 1.6 million per unit.

Import duty on three wheelers has also increased by 5 per cent resulting in its price going up by at least by Rs.19,000 to Rs. 25,000. Motor vehicle industry officials said the 2013 budget took away the 300 per cent tax on super luxury racing cars and at the same time slapped an additional tax on farm machinery including tractors and imposing high excise duty on small cars. They said Sri Lankans with modest incomes including some 500 journalists – recent recipients of the government’s interest free vehicle loan – planning to buy small cars were the hardest hit by the recent excise duty hike.

Tilak Gunasekera, Chairman of the Ceylon Motor Traders Association told the Business Times that the budget proposal makes the 800 cc Maruti, the Alto and other small vehicles beyond the reach of middle income Sri Lankans. Without indicating an increase in import duty in the budget speech in parliament, the government jacked up excise duty on small cars being calculated on the CIF value from Rs.500,000 to Rs.750,000, he revealed.

“As a result the Maruti 800 costs an additional 200,000 rupees, a 4-wheel farm tractor costs an additional 500,000 rupees. The Tata Nano will cost 250,000 rupees more and a bus costs over one million rupees extra”, he said.

The price of the Maruti 800 will increase to around Rs.1.9 million and the Maruti Alto to Rs.2.2 million making these small cars unaffordable for middle income earners, he added.

“They should have increased taxes in a fair manner. This is very much high” he said. Duty on trucks has increased by 41 per cent resulting in the price going up by Rs 550,000. Fixing a minimum level for excise duty on small cars is unjustifiable; Mr. Gunasekera said adding that motor vehicle importers will have to face serious financial problems due to eventual drop in car sales as a result of the duty hike. The drop in the sales of small cars and three wheelers will also result in the loss of tax revenue for the government he added.
Already around 5,000 imported vehicles are dumped in yards due to lack of demand and falling sales.

Commissioner General of Motor Traffic S. H. Harischandra, referring to the racing car tax reduction, said that according to the budget proposal, go-carts and specially designed racing vehicles will be exempted from excise duty. These are basic ‘Single Seater’ or ‘Open Wheel Racing’ vehicles, he added.

The lifting of tax concessions does not mean a lot of revenue is lost for the government due to the single seaters being brought down, he said. However motor vehicle industry sources said that the budget proposal does not clarify “specially designed racing vehicles” therefore it can be interpreted as special sports cars as well. Around 500 super sports cars including Porsches, Turbo, BMWs Jaguars, and Mercedes Benz were imported to the country during the first eight months this year. If such vehicles are exempted from duty, then the country will lose sizable revenue, they added. Two Lamborghinis were also among them. One such super sports car was brought down by a Sri Lankan super racing champion and other by an unknown party, they revealed.

Officials said that with power political backing a new automobile company is to be established soon to import sports cars like Ferraris, Lamborghinis, Jaguar, Aston Martin and racing cars including go-carts. Meanwhile three days after the presentation of the budget, Dominant Motoring

- a subsidiary of Dominant Motoring UK Ltd – advertised in the Hit Ad section of the Sunday Times announcing its entry into the importation of super sports cars.

However a company official said that they were unaware about any tax concessions for specialized sports vehicles and they are importing Lamborghini, Jaguar and Mitsubishi EVO paying all the duty and taxes.

The price of a Lamborghini is in the region of Rs.120 million with tax, he said.




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