Sri Lanka’s vehicle importers have fallen from the frying pan to the fire with the introduction of a 100 per cent margin deposits for opening a Letter of Credit (LC) and the recent tax hike on small Lorries and commercial trucks used for goods transportation, Tilak Gunasekera, President of Ceylon Motor Traders’ Association (CMTA), who [...]

The Sundaytimes Sri Lanka

Motor traders urge consistent tax policy on vehicle imports

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Sri Lanka’s vehicle importers have fallen from the frying pan to the fire with the introduction of a 100 per cent margin deposits for opening a Letter of Credit (LC) and the recent tax hike on small Lorries and commercial trucks used for goods transportation, Tilak Gunasekera, President of Ceylon Motor Traders’ Association (CMTA), who is also the CEO and Executive Director of Sathosa Motors Plc, told the Business Times.

The association has called on the Government to reconsider the regulation which is exerting an adverse impact on the vehicle import industry that has been hit by fluctuating duty for the past several years.

The association also demanded the government to adopt a consistent tax policy on vehicle imports.

He revealed that the Treasury has recently gazetted the 100 percent margin deposits for opening LCs for vehicle imports and 26 per cent tax hike on trucks from an earlier 15 per cent badly hitting motor traders before the unveiling of 2014 budget.

The price of a truck has been increased by Rs. 400,000 more than the previous price, he said, adding that with the tax increase on small lorries and trucks the expansion of the goods transport fleet would be hindered as the demand for these vehicles will drop drastically. The transport and logistics sector is important for the Sri Lanka economy as it impacts on the country’s transportation of agricultural produce from the fields to retail shops. The efficiency and effectiveness of this sector can translate into an increase in productivity of the economy and facilitate faster economic growth.

This ad- hoc tax revisions on commercial vehicles will lead to an increase in the cost for goods transportation and it will definitely pass on to consumers pushing them into further economic difficulty, he added.

The government’s move to introduce a 100 per cent margin deposits for opening a LC will badly affect small players as they have to pay upfront the value of the vehicle which is a huge burden to them, Mr. Gunasekera disclosed. “A consistent policy for vehicle imports is essential to bring stability to the industry,” Mr. Gunasekera said.

The Government imposed a 100 per cent margin deposit on opening a LC to import cars, trucks and vans over concerns that the weak Indian rupee and Japanese Yen could result in higher imports of vehicles.

Treasury officials anticipate an excessive outflow of capital from Sri Lanka due to the increasing value of the US dollar.

The increase in duty of spare parts, hundred percent cash margin for LCs and increase in duty of vehicles imported on permits are revised from time to time.

Central Bank officials said that increasing import duty and a 100 per cent margin deposit on LCs have been imposed to reduce vehicle imports and bridge the budget deficit. The vehicle import duty was increased to ease pressure on the dollar and reduce imports to bridge the budget deficit which has widened as a result of the drop in exports.

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