The import duty on vehicles imposed in this year’s budget proposals will be applicable to all vehicles shortly. Finance Minister Ravi Karunananayke has said that this import duty will be applicable after the presentation of the budget.
The Minister had reiterated that the disclosure was in line with the policy of the government to keep traders and importers informed in advance in order to avoid criticism regarding changes in vehicle taxes. Some had complained that vehicles which arrived in Sri Lanka days after the budget were taxed with import duties that were put forward in the budget.
“We decided to make this announcement as we were subjected to heavy criticism last year and we did not ask anyone not to send any vehicles to Sri Lanka till the budget is presented,” he said
The government increased import duties on some categories of vehicles and the new rates were changed from the vehicles that arrived in the Sri Lanka ports after the budget date early this year and the new rates were charged even though the vehicles were sent prior to the budget.
Meanwhile, Indika Sampath Merenchige of the Vehicle Importers Association concurred that the association was in agreement with the minister’s directives. “We understand the government’s reasons to clamp down on imports, and we realize that it would bring stability to our economy in the context of the depreciation of the rupee against the USD,” he said. “We are ready and willing to engage in discussions with the current government on the steps that can be taken from both sides,” Merenchige said.
According to official data, Sri Lanka’s expenses on vehicle imports have doubled to 744 million US dollars for year 2015 compared to 374 million dollars in the same period last year. Sri Lanka has imported around 491,000 vehicles during the eight months ending August this year.
“We have more vehicles in Sri Lanka than we require at the moment. Even though we understand the need to have a vehicle,” Minister Karunanayake had said during a press briefing recently. “We are taking these measures to control it,” the minister had said.
“We have information that there are unnecessary vehicle imports taking place. From this moment onwards, there won’t be margin for LCs. A 100 percent has to be paid and they can’t get the interest rate advantage,” he had told media representatives.
The government imposed a 100 percent margin on letters of credit (LC) for motor vehicles with immediate effect in an attempt to discourage unnecessary imports, in a move to prevent dollar outflows and further weakening of the rupee currency. Meanwhile the government has also reversed Sept. 16 decision to limit loans and advances for vehicles to 70 percent. The new limit will be 90 percent.