Government bows to CMTA demands, reviews valuation system on vehicle imports
View(s):The government has reviewed the valuation system on vehicle imports, heeding the demand made by the Ceylon Motor Traders Association (CMTA).
The association urged the authorities to accept the actual transacted Free On Board value (FOB) of the vehicles together with the principle of using agents’ transacted value (based on invoices by highly reputed manufacturers) as the base on which to fix the value for customs duty purposes of used vehicle imports.
This system will replace the present system of the Customs fixing the ‘value for customs duty purposes based on prices published on various websites’.
The CMTA has been objecting to the presently adopted system and argues to re-establish the previous system.
CMTA Chairman Gihan Pilapitiya said, “previously, Customs accepted our transacted values, as we are the direct agent of highly respected international manufacturers”.
Further, Customs used these values to fix the values for used car importers. Customs adopted this practice, in accordance with the Sri Lanka Customs Ordinance, because of the wide variance (reduction) between the transacted value of the agent and the used car importer, he said.Based on the April 2014 gazette, Customs duty will be set by the Director General of Customs, based on manufacturer values.
Mr. Pilapitiya said “CMTA has no objection to this, if ‘manufacturers’ values are based on the manufacturers invoice to its agent”.
The Customs Ordinance requires Customs to inform the importer if they do not accept their transacted value and also to present to the importer their reasons for doubting the said value, and then giving the importer the opportunity to justify his positionThis matter has been brought to the notice of the new Finance Minister Ravi Karunanayake, and he has directed the officials to review the valuation system.
Mr. Pilapitiya expressed his appreciation on the Minister’s initiative to request his officials to re-study the Customs Valuation System with respect to the setting of customs duty for the import of motor vehicles.
He said duty and other taxes levied on the automotive industry had totalled approximately Rs.100 billion in 2014 and this figure would increase further if a set of consistent and transparent policies were adopted by the Government with the concurrence and support of the industry.
It is also a fact that the values of the used vehicle imports are always understated for duty purposes and therefore the government’s loss from re-value is extremely high.
The only way to prevent this is to fix values of all vehicles based on the manufacturers or the local agents confirmed price.
For example when a brand new model imported by the local agent is valued at US$50,000 the same vehicle is imported and value declared for payment of duty by a used car importer at a price of $35,000.
Ideally in a case such as this the value of the vehicle imported by the used car importer had to be treated for customs or excise duty at the agent’s valuation only.
As per the current practice if the declared value for a vehicle imported by a used car dealer is considered for customs value, on the face of it the revenue loss to the government is about Rs. 2 million per unit.