Motor traders perturbed over new luxury tax on vehicles
Sri Lanka’s motor traders are perturbed following 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) expressed concern over the vehicle tax increase and thereby 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 on Thursday that the vehicles with CIF value of over Rs 3.5 million will be subjected to a new luxury tax imposed in addition to the Customs duty for the first time in Sri Lanka.
“A sum of Rs.1.24 million would have to be paid as a luxury tax for a vehicle with a 1,000cc engine capacity in addition to the manufacturing cost,” he said adding that a car permit holder has to pay the luxury tax depending on the model of vehicle.
Prices of Toyota Premier, Toyota Axio, Honda Vezel, Toyota CHR and Honda Grace which fall under the luxury tax category will rise, he said.
The Luxury Tax free threshold will be the Cost Insurance Freight (CIF) value in the case of imported vehicles and ex-factory cost (manufacturer’s price), in the case of locally assembled vehicles.
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.
VIASL also appealed to the Treasury authorities to increase the current loan to-value ratio (LTV) to 75 per cent from 50 per cent making it possible for buyers to go for new vehicles under leasing.
Leading members of the VIASL expressed concern on the Finance Minister’s failure to mention the exact date of removing the 200 per cent 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 per cent cash margin was against the General Agreement on Tariffs and Trade (GATT) agreement, they added.
As a result of the revision of Excise Duty on vehicles and implementation of the luxury tax from the recent budget, the vehicle prices would be increased by a minimum of Rs.150, 000 and maximum of Rs. 600,000, Mr. Peiris said.