The budgetary decision to increase the import duty on vehicles by 2.5% will push up market prices of automobiles by at least 7%, industry officials said.
`A 2.5% increase may appear to be innocuous on paper, but in terms of reality it translates into an almost three-fold increase in import duty as it touches on other taxes as well`, they explained.
This means that a car which, for example, was sold at one million rupees earlier, will now cost an additional Rs. 70,000/-, they said.
`That`s right, this is not a flat, straight-forward 2.5% import duty revision. The Customs formula will reflect an all round 7% increase`, says Rajieve Fernando, General Manager (Sales), Senok Automobiles.
As this duty revision is applicable to both new and reconditioned vehicles, prices of both categories are expected to climb over the next few days, industry sources indicated.
`We will be adjusting prices on Monday`, an importer of brand new automobiles said. `There could be an enhanced price difference of anything between 7% and 10%`.
It was just two months back that the government increased the cess on imported vehicles by 5% which pushed up the price of a new luxury vehicle by more than Rs. 300,000, Fernando, whose company markets the German-made, luxury Audi in Sri Lanka, said.
`With the latest tax component, we have to now pay an incredible 217% as government taxes on the CIF value of a vehicle under this segment`, he complained.
`The earlier 5% increase in the cess, as calculated by the Customs, added up to an enhanced 11.69% on the CIF value when excise and other duties were taken into account`, he pointed out.
With the latest import duty increase, an Audi priced at Rs. 15 million, will go up by around Rs. 1.2 million to Rs. 1.5 million, Fernando explained.
`These senseless taxes are adding to the misery of an industry struggling for survival, he underscored. `Battered by suffocating taxes and dwindling sales, the industry is finding it difficult to keep head above water`.
Owning a vehicle will be beyond the reach of an average family as the additional tax burden will reflect on reconditioned automobiles as well, an industry source noted.
`This is bad for business`.