CoPF flags massive revenue losses from vehicle import valuation practices

CoPF Chairman MP Dr. Harsha de Silva 

• Expresses serious concern over outdated Customs valuation of used vehicle imports, warning of billions in annual revenue loss
• CoPF Chair Dr. Harsha de Silva questions why 15% depreciation applies even to nearly new vehicles under 50 km or five days old
• Customs official states depreciation follows 2016 Gazette, with no new guidance since
• CoPF highlights possible Rs. 36.5 b in yearly losses based on current practices
• Industry representatives protest unfair valuations, especially for three-year-old Japanese vehicles and inconsistent depreciation treatment
• Importers complain identical vehicles face lower duties compared to new than used, putting them at disadvantage 
• Claims EV imports show inconsistent power declarations

The Committee on Public Finance (CoPF) last week raised serious concerns over how used-vehicle imports are being valued, warning that the Government could be losing billions of rupees each year due to outdated Customs practices.

During the meeting, CoPF Chair MP Dr. Harsha de Silva raised questions about the rationale behind depreciating vehicle values by 15% even for imports with mileage as low as under 50 kilometres or with an age of only five days. 

Sri Lanka Customs Additional Director General Seevali Arukgoda explained that current depreciation calculations are based on a Gazette from 2016, with no updated instructions issued since then. 

“We have not received any direction neither on timelines nor mileage on how to apply depreciation. We have been practicing as per the Gazette cited depreciation guidelines,” he added.

Dr. de Silva challenged this explanation, questioning why Sri Lanka Customs had failed to notify higher authorities about these apparent loopholes. 

When asked how many vehicles are being cleared by Sri Lanka Customs per day, Arukgoda said they processes around 200 to 300 vehicles daily, whilst noting that since the reopening of the vehicle imports, only around 16,000 motor vehicles have come so far.

It was cited that the Government has lost revenue of Rs. 250 billion for three days based on some random data check. Given this scenario, CoPF Chair pointed out that if losses amount to Rs. 100 billion over a day, it could translate to a staggering Rs. 36.5 billion in annual losses for the Government coffers.

Industry representatives who were present at the sitting also voiced frustrations.

Vehicle Importers Association of Lanka (VIAL) President Sampath Merenchige argued that importers of three-year old vehicles from Japan face higher valuation than their actual market price, while VIASL President Prasad Manage complained they receive no depreciation allowance for even three-year old vehicles and only get the discount on the brand new retail price.

Another importer pointed out that even identical vehicles, down to the chassis number are subject to significantly lower duties when imported as brand new, compared to the used vehicles. This he claimed placed used vehicle importers at a severe disadvantage.

Manage further highlighted discrepancies in how vehicles such as the BYD Sealion are declared. “When we import it is declared of having 150 KW power but when imported directly by the manufacturer, BYD declares only 100KW,” he disclosed, raising concerns on the inconsistency. 

Highlighting the recent Government decision to increase electric vehicle (EV) duties from 15% to 30%, Dr. de Silva pressed for clarity on vehicle registration practices from the Department of Motor Traffic (DMT).

DMT Commissioner (Control) D.P.C. Udaya Kumara responded that their Department act strictly according to Customs declarations and their role is limited to registering vehicles as per those decisions.

The CoPF called for an urgent review of the valuation procedures and for authorities to close legal loopholes that could be enabling significant revenue leakage from the sector.