Sri Lankan authorities are to crack down on vehicle assembly rackets being carried out by businessmen who operate automobile assembly plants after importing parts from countries like Japan and China, official sources revealed. These assembled vehicles are sold in the local market at a price lower than the actual price with taxes, a government official [...]

The Sundaytimes Sri Lanka

Sri Lankan authorities to crack down on vehicle assembly rackets

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Sri Lankan authorities are to crack down on vehicle assembly rackets being carried out by businessmen who operate automobile assembly plants after importing parts from countries like Japan and China, official sources revealed.

These assembled vehicles are sold in the local market at a price lower than the actual price with taxes, a government official said, adding that this fraudulent practice deprives the state of much needed tax revenue for the country. The Customs Department has been directed to be vigilant on clearing consignments containing vehicle parts as such importation is only allowed for importers with permits issued by the Board of Investment (BOI) to carry out assembling vehicles for the export market or to sell it locally with 30 per cent value addition.

The BOI also issues permits to import vehicle parts under an agreement that the relevant company should use 30 per cent of local components as a value addition to automobile assembly operations.

The Investment Promotion Ministry has issued a new guideline making it compulsory for new vehicle assembly companies to export 60 per cent of their finished products, official sources said, adding that this guideline does not apply for existing companies.

The Customs is levying a minimal tax for the importation of vehicle parts under the BOI agreement.

The BOI will issue a permit to such companies under certain conditions that it would generate jobs for the youth, to facilitate the manufacture of parts locally, and to generate foreign exchange for the country through the export of the assembled vehicle. A senior member of the Motor Traders Association alleged that these illegal vehicle assembly rackets are being carried out with the connivance of some officials attached to the Department of Motor Traffic and Customs.

He disclosed that in some occasions three different companies were involved in importing the engine, chassis and the body, and another company was carrying out vehicle assembly operations.

The fraudulent practice has deprived the Customs Department of its tax revenue on imported spare parts and also affecting genuine vehicle importers, he added.

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