Business

Vehicle importers request import quota

– Foreign exchange-based quota mooted

– Industry in dire straits after import ban

 

By Madhusha Thavapalakumar

The Vehicle Importers Association of Lanka (VIAL) is to request the Government to allow it a certain quota of vehicle imports per annum as a compromise, with the aim of not driving importers out of business while also not completely draining the Government’s coffers of valuable foreign exchange. 

The need for such a request has been prompted by the total ban on vehicle imports which are in place to avert a possible foreign exchange crisis which has left the importers with virtually no revenue source, according to VIAL President Indika Sampath Merenchige.

Merenchige told The Sunday Morning Business that providing an annual quota for vehicle import expenditure would be a win-win situation for both the Government and vehicle importers. 

“If there is a quota, the Government can be conscious about their foreign exchange spending on vehicle imports in a year. They will know there is a quota given to importers and at the end of the year, the spending would certainly be well within the quota range and it would not be a shock to them. Meanwhile, this quota will ensure vehicle dealers’ survival in the industry,” Merenchige added. 

Upon being provided an annual quota, the industry will distribute it amongst existing local vehicle importers, who will then import vehicles within their distributed range. Last year, Sri Lanka had spent about $ 815.7 million on vehicle imports, compared to $ 1.5 billion the previous year. 

Along with this request, the VIAL is expected to make several other requests which include changing the tax structure of imported vehicles in Sri Lanka and attracting foreign direct investment (FDIs) into a vehicle component manufacturing sector. 

Commenting on the existing tax structure on imported vehicles, he noted that for the past five years under the former Government, the structure had been changed a number of times based on no proper method, which led to a reduction in the Government’s revenue earned through Customs Duty on imported vehicles. To rectify the issue under the current Government, the VIAL is suggesting a committee be appointed to restructure the vehicle tax system. 

Furthermore, Merenchige added that the Government should allow the importation of vehicles that are older than five to seven years which would cut down foreign exchange spending on imported vehicles significantly.   

“Sri Lanka is not a developed country. We have to preserve our foreign exchange and this is certainly an efficient way to do that. Importing older vehicles would be comparatively cheaper. This does not mean we will import vehicles with issues. We have the expertise here to check such vehicles and make the necessary changes. This method can start with 1,000 cc-1,500 cc hybrid vehicles,” Merenchige noted. 

Before the import restrictions, the age of used cars that were imported had to be less than three years; while imported vans and dual-purpose vehicles had to be no more than five years old, the age limit for imported buses, motor cars, sports utility vehicles (jeeps), all-terrain vehicles (beach bikes), ambulances, and motorbikes were three years.

In case of a brand-new vehicle imported on an invoice issued or certified by the manufacturer, the transaction value is determined by Sri Lanka Customs as the value for computation for Customs Duty. For all other vehicles, the value cannot be below 85% of the manufacturer’s value, excluding local taxes, of a similar or an identical brand-new vehicle at the country of export.