Duty queries jam the brakes on vehicle removals from Customs

By Hiran H. Senewiratne

The Vehicle Importers Association of Lanka (VIAL) is puzzled over the new duty calculation method that is to be adopted by the government on vehicles. As a result, all vehicles that are being imported into Sri Lanka are stuck at the Sri Lanka Customs, until the new method comes into play.

VIAL Executive Committee member Dayan Merenchige told The Island Financial Review that they are confused by the new duty imposing method that the government is to adopt on vehicle imports. They have already introduced three methods and VIAL is not sure which duty imposition method is to be adopted, he said.

"At present, all the imported vehicles are stuck at the Sri Lanka Customs until the new method is introduced to importers, Merenchige said.

"Several hundreds of vehicles are now just stuck at the Customs till the new duty method comes into play and this will be decided by the Finance Ministry, he said.

"Although the government has reduced import duties on 800 and 1000cc cars, while increasing duty on higher engine capacity cars. This is a move likely to benefit India-made smaller vehicles. But duties will not come down due to the new duty method that the government is to introduce, he said.

Prices of vehicles above 1000cc engine capacity will increase following the increase in the minimum unit tax from Friday, VIAL said.

According to a gazette notification released last Friday by the Ministry of Finance, the 800 and 1000cc cars will now attract a lower import tax band.

A majority of this category of imports is dominated by India-made cars. An example is the Maruti Wagon-R.

The tax range for such cars is expected to come down from its present tax range of Rs 1.5 – Rs 1.6 million to about Rs 1.35 million, car dealers said.

However, the India-made three wheeler auto taxies have been hit by a raised band and will have an increased rate of customs duty, dealers said.

The luxury European and other brand users are the worst-hit, with the import tax on one particular brand which stood at about Rs 5.4 million now set to rise to above Rs 7.6 million.

This would raise the market price by about 13 million additionally, the dealers said.

Dwindling foreign reserves have forced the government to curb vehicle imports by imposing higher taxes.

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