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Vehicle import restrictions lifted, but prices soar
View(s):- Treasury announces new taxes, including surcharge on Customs duty
A string of taxes has sent the imported vehicle prices soaring, with the five-year restriction on imports being lifted with effect from yesterday.
Vehicle importers were finalising their prices yesterday, but the initial calculation of the taxes is set to have a severe impact on the prices.
“Certainly, the car prices have gone up significantly compared to 2019 prices or before the COVID-19 pandemic period, causing limited affordability and market shrinking,” Ceylon Motor Traders Association Chairman Andrew Perera told the Sunday Times.
The estimated costs of some of the imported vehicles in terms of the revised tax regimes based on a web tool designed by financial provider CAL Group are as follows: Suzuki WagonR (2024) – Rs 7 million; Honda Vezel – Rs 18.2 million; Maruti Suzuki Alto – Rs 5 million; Toyota Hilux 2024 – Rs 21 million; Toyota Aqua (Hybrid) – Rs 16.8 million; and Nissan X Trail – Rs 26.8 million, to name a few.
“We have to wait and see how the market reacts,”Mr. Perera said. Noting that the luxury tax threshold of earlier Rs 3.5 million (USD 12,500) has been increased up to Rs 5 million (USD 14,500) according to the revised taxes and exchange rate hike, Mr. Perera noted that this would allow middle-class families to consider purchasing cars and other vehicles at a reasonable price.
Meanwhile, on vehicle imports, the Treasury has announced several fresh conditions, including mandatory declaration of submitting Taxpayer Identification Number (TIN) details to the Department of Motor Traffic for registration of vehicles.
According to the recent gazette notifications issued on the revised tax regime, a surcharge amounting to 30 percent of the Cost Insurance Freight (CIF) value is to be added to the Customs Import Duty effective from February 1.
This will come in the form of twenty percent of the currently applicable CID plus a fifty percent surcharge on it, according to a Treasury notice.
Sections of vehicle importers, especially those involved in importing reconditioned vehicles, were also concerned about the government’s decision to allow only imports of vehicles within three years of manufacture.
Usman Ali Liyakath Ali, Assistant Secretary of the Vehicle Importer’s Association, said there was some confusion over how the Value Added Tax would be calculated since it previously included the CIF and excise duty. “There is a lack of clarity on whether the customs import duty and the luxury tax would be included in the VAT calculation, but we expect it will be so because there will be an increase in tax evasion if it is not collected at the import point.”
Personal importers can only import one vehicle within 12 months, provided they have a tax file at the Inland Revenue Department, and anyone importing more would have to be registered at the Department of Motor Traffic.
Mr. Ali also said the new regulation on the age of vehicles was also problematic. Previously, the age was calculated from the date of first registration, which was easy to monitor. The new rule states that age is calculated from the manufacture date, which is harder to establish as it is not mentioned anywhere.
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