Vehicle importers warn of sharp price hikes after valuation revision

Imported used vehicle prices are expected to rise significantly following the removal of a 15% valuation reduction previously used to determine the Customs value of used vehicles, the Vehicle Importers Association of Sri Lanka (VIASL) warned.

Popular vehicle models are expected to record significant price increases across the market, according to VIASL Vice President and spokesperson Arosha Rodrigo. A fast-moving model like the Honda Vezel Z Play SUV could see a price increase of around Rs. 2 million, whilst a Suzuki Wagon R could increase by approximately Rs. 700,000.

Changes to the Customs valuation methodology used for imported used vehicles caused the increase, Rodrigo stated. Gazette Extraordinary No. 1971/10 dated 14 June 2016 prescribes two distinct methods to determine the Customs value of motor vehicles, an association spokesman noted. Section 1(A) applies to brand-new motor vehicles, whilst Section 1(B) applies to all other motor vehicles, including used vehicles.

Repeated claims exist that used vehicles receive a 15% concession and that the Government loses revenue when brand-new vehicles are first registered overseas and subsequently exported as used vehicles to qualify under import regulations, he said.

However, the VIASL argued that such claims overlook the basis on which Customs values are calculated.

The Ministry of Finance introduced the 15% reduction to better reflect the actual transaction value of vehicles rather than published retail prices, according to the association. The ministry recognised that listed retail prices often do not represent the final purchase price due to bulk-purchase discounts available to large-scale dealers and exporters, dealer margins incorporated into retail prices, local taxes and overhead costs, and commercial price negotiations common in international business transactions.

The adjustment was not a special concession but a valuation mechanism designed to account for market realities and align Customs values with actual purchase costs incurred by importers, the VIASL maintained.

Higher Customs values will translate into increased import duties and taxes, ultimately driving up vehicle prices for consumers, the association warned regarding the consequences of removing the reduction. It urged the authorities to carefully review the decision, noting that it could significantly impact vehicle affordability and the recovery of the vehicle import sector in Sri Lanka.