The Finance Ministry reiterated yesterday that the luxury tax imposed on motor vehicles will not be applicable to small motor vehicles.
As proposed in Budget 2019 by Finance Minister Mangala Samaraweera, in the amendment to the Finance Act, the luxury tax on motor vehicles will be levied only for luxury cars and jeeps, and the new tax does not apply to any small cars.
Vans, single cabs, double cabs, motorcycles, and motor tricycles are also not subject to this luxury tax. Previously, double cabs were levied under the luxury tax, but it will be removed from 1 November. This luxury tax will be effective from 6 March and the new tax will apply to all luxury vehicles imported with letters of credit opened after 6 March.As per the new regulations, the luxury tax will only be imposed when importing diesel and petrol cars and jeeps worth over Rs. 3.5 million. Only the amount exceeding this limit will be taxed.A luxury tax for hybrid vehicles will be imposed when their CIF value exceeds Rs. 4 million for the amount exceeding the limit; for electric vehicles, the limit is Rs. 6 million. As the technology for automobiles develops, the luxury of a vehicle is determined not by engine capacity but by the features of a vehicle. Accordingly, the tax on petrol cars below 1800 cylinder, diesel cars and jeeps below 2300 cylinders, and electric vehicles below 200 kW will be exempted from the tax effective 1 November. Vehicles imported and cleared before 21 April 2020 after opening Letters of Credit until 31 October 2019, will be exempted from the luxury tax. It is further emphasised that this luxury tax will not be levied on small vehicles.Accordingly, Toyota Vitz, Suzuki Every, Toyota Roomy, Suzuki Alto, Suzuki Baleno, Daihatsu Petrol, Honda Grace, Suzuki Wagon R, Toyota Aqua are not subjected to this luxury tax. Also normal Axio, Premio and Allion models will also be free from the luxury tax.