Government to levy vehicle import fee for Entitlement Certificate
View(s):In addition to already introduced import control measures, the Sri Lanka government will make a vehicle import fee compulsory for importers to obtain a Vehicle Entitlement Certificate for each vehicle with the aim of discouraging car imports and ease pressure off the rapidly depreciating rupee.
This certificate will be issued by the Inland Revenue Department (IRD) and the certificate will be necessary for opening a Letter of Credit for importing a vehicle, official sources said.
A Vehicle Entitlement Certificate fee of Rs. 2,000 per motor cycle and three wheeler, Rs.15,000 for a motor car and Rs.10,000 per vehicle for all other vehicles is to be levied in accordance with this proposal.
The government has already introduced a mandatory 200 per cent cash margin on opening of letters of credit for import of vehicles, temporary suspension of ‘ duty free/duty slashed car permits’ and the increase of Loan to Value (LTV) ratio for vehicle financing.
The Finance Ministry recently revised upwards the excise duty levied on vehicles with engine capacity less than 1000cc, to control the heavy outflow of foreign exchange.
Accordingly, the duty on vehicles with less than 1000cc engine capacity has been increased to Rs.1.5 million, while slapping a Rs.1.25 million duty on hybrid and electric vehicles with less than 1000cc engine capacity.
The new announcement came as the Central Bank warned that car imports had inflated the trade deficit by US $700 million year-on-year to $4.9 billion for the first five months of 2018.
However, the impact of the recent increase in minimum duty rates and new import control measures will only be reflected in registrations towards the end of the year as there were large stocks of unregistered cars in the market and many more at sea that will not be taxed at the higher rates, JB Securities Equities Research revealed.
Sri Lanka’s motor car registrations declined to 4,990 units in September 2018 from 7,003 in the previous month following a hike in taxes imposed by the government earlier this year, Motor Traffic Department (MTD) data showed
Total vehicle registrations were down to 34,293 units from 43,190 in the month of August.
According to the report, the year 2017 saw a rise in import expenditure despite a fall in import volume by 11 per cent with yearly new registrations also declining by 9 per cent, he said.
“There is yet a lot of inventory of unsold cars in yards or on the water thus one will not see a dramatic fall in registrations in the next 3-4 months until it is sold,” the report revealed.
The Ceylon Motor Traders Association (CMTA) stated that there is a surplus of vehicles imported into Sri Lanka and the numbers imported are not justified by the size of the market.
Many of these vehicles are imported by individuals or private dealers who have the capacity to stock large volumes.
It is these volumes of unregulated imports that are necessitating the drastic action by the Government, a CMTA media release revealed.