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Despite the new government in its interim Budget presented in January by Finance Minister Ravi Karunanayake pledging that the policy of the UNP-led government would be to make vehicles affordable not only to the super-rich but to the middle class, the extraordinary gazette signed recently has completely squashed that objective, motor sector analysts opined last week.

Karunanayake while presenting the interim Budget speech in January this year proposed to reduce taxes applicable on motor cars with engine capacity less than 1,000 cc by around 15 percent.  The move at the time according to the Minister was to encourage low income families to purchase a motor car and improve their living standards.

However, contradicting the pledges, Karunanayake recently signed an extraordinary gazette which would change the basis on which the value of certain motor vehicles would be calculated, the Department of Customs announced last week.

Co-Chairman, Vehicle Importers Association of Lanka (VIAL), Kokila Deekiriwewa said the manner in which the gazette notification was implemented is questionable since it had not got the approval of relevant stakeholders and the Cabinet. “We hope to meet with the Treasury officials regarding this issue,” he said.

According to the gazette notification issued on September 22, customs value of certain motor vehicles imported should be the aggregate of customs value, determined by the Director General of Customs based on the price furnished by the manufacturer of such vehicle, cost of transport to the port of Sri Lanka, loading, unloading and handling charges associated with the transport to the port of Sri Lanka, and cost of insurance to the port of Sri Lanka.

This, according to dealers, would shoot up vehicle prices by 50%, thus affecting the purchasing power of consumers.
An official at Stafford Motors also said there was confusion over the gazette notification since dealers and officials were unsure of how it was to be implemented. The official added that the move would have an impact on the importation of high-end luxury vehicles from the Europe and Japan. “Japanese vehicles are not the only ones affected. European vehicles also would face an adverse impact through this. However, we hope to have a clear picture by next week on this issue,” the official added.

In addition, the continuous changes in vehicle import policies since January has also created uncertainty among consumers and dealers alike.

By mid-September, the government brought in further changes when the Central Bank barred commercial banks and finance companies to grant loans and leases in excess of 70 percent of the value of the vehicle.

However, on October 2, barely three weeks after the initial announcement, the government once again revised the loan-to-value (LTV), increasing it to 90 percent. In addition, Sri Lanka also imposed a 100 percent margin deposit on car import Letter of Credits (LC).

The Finance Minister had also requested Japanese vehicle exporters to halt exports to Sri Lanka until the government presents its budget for 2016.