Indian small cars to benefit from Sri Lankan import duty changes

Sri Lanka has reduced import duties on cars with engine capacity of 800 and 1,000 cubic centimetre (cc) while increasing duty on higher engine capacity cars, a move likely to benefit India-made smaller vehicles.

Prices of vehicles with above 1,000cc engine capacity will increase following the increase of the minimum unit tax from yesterday, Sri Lanka's Vehicle Importers Association said.

According to a gazette notification released yesterday by the ministry of finance, the 800 and 1,000cc cars would have a lower import tax band.

A majority of this category's imports are dominated by India-made cars. An example is of the India-made Maruti Wagon-R.

The tax range for such cars is expected to come down from its present tax range of 1.5 to 1.6 million Sri Lanka rupees to about 1.35 million, car dealers said.

However, the India-made three wheeler auto taxies have been hit by a raised band and will have an increased rate of customs duty, the dealers said.

Rich users of SUVs are the worst-hit, with the import tax on one particular brand, which stood at about 5.4 million Sri Lankan rupees, rising up to above 7.6 million Sri Lankan rupees.

This would raise the market price by about 13 million additionally, the dealers said.

Dwindling foreign reserves have forced the government to curb vehicle imports by imposing higher taxes.