Government’s tax reduction moves the vehicle market, doubling revenue
Sri Lanka’s revenue from vehicle imports more than doubled to Rs. 126.1 billion during the first seven months this year compared to same period in 2014 with the government’s move to bring down taxes on vehicle imports through the 2015 interim budget paying rich dividends, Finance Ministry sources said.
The country has achieved 97 per cent of the vehicle import revenue target for the whole year within seven months.
This was mainly due to the 93 per cent increase in vehicle imports as a result of the tax cut enforced from the budget, a senior official of the ministry told the Business Times.
Vehicle import duty collection had been on the rise due to the streamlining of collection and reducing corruption and tax evasion, he revealed. According to Motor Traffic Department (MTD) data, vehicle imports surged to 344,570 in the first seven months of 2015 from 178,439 in the same period last year.
The demand for vehicles has increased mainly from state sector employees who benefited from the government pay hike and the interest rate reduction on bank and finance company loans and leasing facilities, Finance Ministry official said.
Another reason for the revenue hike was the government’s action to remove the involvement of the Inland Revenue Department in handling transfer documents of duty free/ duty slashed vehicle permits, Tilak Gunasekera, Past President of the Ceylon Motor Traders’ Association and also Managing Director of Sathosa Motors Plc, told the Business Times. He added that this procedure has been made easy for motor traders to get clearance from the MTD by paying a 10 per cent levy.
India continues to dominate the Sri Lankan market for vehicle imports accounting for 50 per cent of the import value. Japan has remained resilient maintaining 30 per cent of market value facing challenges from other countries, he disclosed.
India’s Tata and Maruti brands are leading Sri Lanka’s vehicles market taking a major share of both automobile and trucks, he revealed. Sri Lanka’s thriving vehicle market has recorded further a surge in sales following import duty reductions mainly on small cars, he said.
The sale of new cars had been around two to three units a month before the reduction of duty while at present sales has increased. Buyers of new cars are on the waiting list of many vehicle dealers including AMW, Sathosa Motors and KIA as the principle agents take some time to deliver the orders.
He said by giving concessions for more imports of small cars with a tax reduction there would be more money going out of the country making a dent on foreign reserves. Mr. Gunasekera noted that the influx of vehicles without control was not favourable for the country and the economy in the long run as the country’s vehicle fleet would jump to unmanageable proportions.
| Sri Lanka’s vehicle registrations up 93% Sri Lanka’s vehicle registrations rose by 93 per cent to 344,570 units in the first seven months of this year from 178,439 in the same period in 2014, Motor Traffic Department (MTD) data showed. During this period, motor car registrations rose 296 per cent from a year earlier to 22,417 units from 5,660 despite plunging sales of hybrid cars after a tax hike in January Three wheeler registrations increased 72 per cent to 73,464 from 42,695 units registered in the first seven months of 2014. About 90 per cent of the three wheelers were bought on credit, the same as last year and 62 per cent of motor cycles were also purchased on credit, the research report revealed. | |
| Local motor trade heading for booming sales Imports of small cars from India have begun to rise sharply from December 2014, Tilak Gunasekara, Managing Director of Sathosa Motors Plc said adding that registrations of Maruti/Suzuki cars from India were around 3000 per month during this period. He noted that buyers will have to be in the waiting list for a couple of months to get down their Maruti/Suzuki cars. The demand for these vehicles is increasing daily, he added. Sri Lanka’s imports including vehicle imports have surged with India emerging as the country’s leading import source during the first seven months this year. Cars were among the best type of imports from a government revenue perspective, as more than two dollars equivalent of revenue is earned for every dollar spent, except for electric cars and hybrids, which are taxed less, he opined. He noted that the industry has been able to breathe a sigh of relief following the new tax regime introduced in the 2015 interim budget and the current valuation system. |