Bonanza for only 200 individual vehicle importers

Monday, 11 January 2016 00:00 -     - {{hitsCtrl.values.hits}}

  • Govt. restricts the number who will enjoy duty concessions prior to 2016 Budget 
  • Motor importers disappointed by the final outcome
  • VIAL calls for clarity in Govt. statements

By Charumini de Silva

The Government has decided to grant pre-2016 Budget duty concessions to only 200 individual vehicle importers who had opened Letter of Credits (LCs) before 20 November 2015.

Motor importers yesterday said they were disappointed with the final decision of the Government. “After three weeks of deliberations the Government has decided only to exempt 200 individual vehicle importers from the increased import duty imposed by the Budget 2016. 

These 200 are individuals who had opened Letters of Credit (LCs) before the date of 2016 Budget presentation which was 20 November 2015,” Vehicle Importers Association of Lanka (VIAL) President Indika Sampath Merenchige said.

This move was confirmed by Cabinet co-spokesman Gayantha Karunathilake as well last week though his number was lower. “The Cabinet of Ministers finally agreed to exempt increased import duty for around 129 personal vehicle importers for which LCs had been opened before 20 November 2015,” Minister Karunathilake told the Daily FT.

However, Merenchige said that the circular was still not out.

Three weeks ago when the Government said they would consider the matter, the vehicle import market was at its lowest levels and the customers were speculating that the prices would come down with the final decision of the Government, Merenchige told the Daily FT.

Clarifying his point further, he emphasised that they hoped in the future the Government would speak in one voice without varying its statements thereby misleading the industry.

“We respect the Government’s authority, whether it is going to increase the tax or to reduce it. But the Government needs to be consistent. Failure only leads to confusion and lack of confidence,” Merenchige opined.

He said they were all planning to go ahead with the adjustments proposed by the Finance Minister Ravi Karunanayake, but it was repeatedly announced by Deputy Finance Minister Lakshman Yapa in Parliament and Co-cabinet Spokesman Gayantha Karunathilake at a cabinet press briefing that the Government had decided to exempt increased import duty imposed by the Budget 2016 for which LCs had been opened before 20 November 2015.

“After these statements by various parties by the Government we were hopeful that we would be able to buy those vehicles at the previous tax structure at a lower price simply,” he pointed out.

Merenchige asserted that the customers were in a real dilemma due to these statements. 

According to VIAL tax on Hiace van was increased by Rs. 3.5 million, electric cars by Rs. 2.5 million while other vehicles at the range of Rs. 0.5 to 1 million.  In addition to the tax hike the vehicle importers also had to bear an extra cost of Rs. 40,000 to Rs. 50,000 demurrage at the Port.

“It is very unfair. Vehicle importers had been paying demurrage for shipments received awaiting final decision and now there is no relief but only additional cost,” he added.

During the cabinet meeting held on 23 December 2015, President Maithripala Sirisena re-adjusted tax increase of electric vehicles where he withdrew the 2016 budget proposal to increase the import tax on electric vehicles by 50% and directed the import tax on electric vehicles to remain at 5%.

VIAL hailed the decision to withdraw the proposal noting that it was advantageous to the vehicle import industry.

The Government imposed a 100% margin on LCs for motor vehicles with immediate effect on 2 October 2015, in an attempt to discourage unnecessary imports, in a move to prevent dollar outflows and further weakening of the rupee currency.