Vehicle Luxury Tax revised re-introducing CIF value based taxation
View(s):The government has revised the luxury tax (LT) formula and is to introduce a LT based on the vehicle manufacturing cost in addition to custom duty if its manufacturing cost (Cost Insurance Freight/CIF value) exceeds Rs.3.5 million.
Under this new formula, the LT vehicle import duty will be levied on the basis of engine capacity and LT tax on CIF value, informed official sources said.
Revision of excise duty on motor vehicles and implementation of LT on luxury motor vehicles is expected to generate revenue of Rs.48 billion, a senior Treasury official said. The relevant circular on luxury tax amendment will be issued soon, he said.
Earlier the LT on vehicles was based on engine capacity and now it will be changed to CIF value, he said adding that the government has decided to amend the luxury tax on motor vehicles to be based on price instead of engine capacity, specifying the vehicle categories which are exempt.
As per the Finance Act 2018, the LT was applicable earlier on only three categories of vehicles, including petrol vehicles with cylinder capacity more than 1800 cc, diesel vehicles with cylinder capacity more than 2300 cc, and electric vehicles with more than 200kw power.
But now all vehicles with a CIF value of Rs. 3.5 million or over will be subjected to an additional LT, he said.
Vehicle Importers Association of Sri Lanka (VIASL) Chairman Ranjan Peiris said most of the vehicles used by motorists like Toyota Premier, Toyota Axio, Honda Vezel, Toyota CHR and Honda Grace come under the LT bracket.
In accordance with the new tax, Rs. 1.2 million would have to be paid as LT for a vehicle with a 1,000cc engine capacity in addition to the manufacturing cost, he added.
A member of the Ceylon Motor Traders Association said that it’s not fair to charge the same duty for a 2,000 cc Korean-made vehicle produced and purchased for US$20,000 and a European manufactured one with same engine capacity purchased at $35,000, under the earlier taxation system.
Heeding to representations made by motor traders, the Finance Ministry has decided to amend the LT imposition reverting to the previous method of taxation on the price of the model.
(BS)