Relief for pre-Budget vehicle importers

Friday, 17 November 2017 00:00 - - {{hitsCtrl.values.hits}}

Finance Ministry says individuals who opened LC for import of vehicles prior to Budget can clear it under previous duty rate

Minister of Finance and Mass Media Mangala Samaraweera, while further relaxing the policies announced in Budget 2018 on the importation of vehicles, has also revised the policy on the Loan to Value (LTV) ratio on the financing for the purchase of vehicles under a lease basis.

Minister Samaraweera, making the closing remarks of the Second Reading of the Budget 2018 debate, also announced details on the procedure for collecting VAT on the sale of a Condominium Housing Unit and the removal of restrictions on foreign ownership in shipping and freight forwarding agencies.

Accordingly, individuals who have already opened Letters of Credit in their names to import vehicles prior to 9 November will be allowed to clear those vehicles at the rate of duty that prevailed before the Budget. However, these vehicles should be cleared before 30 April 2018.

Further, the tax concession announced in Budget 2018 for the imported brand new electric car will be extended to cover used electric cars, which are not more than one year old. According to a Gazette notification issued by Minister Samaraweera, the duty of used electric cars that are not more than one year old will be reduced by around Rs. 1 million.

Consequently, the duty rate applicable to electric vehicles (less than one year old) will be Rs. 12,500 per KW power of the motor of the electric car which is less than 100 KW power.

In Budget 2018, the Finance Minister had introduced an appropriate incentive structure to promote importation of vehicles powered by non-fossil fuel. He had introduced a new formula for import taxes on vehicles to be levied based on the engine capacity instead of the ad-valorem rate (CIF Value of the vehicle) rationalising the tax base on a vehicle.

In addition, the Loan to Value (LTV) ratio for motor cars, which is 50:50, at present will be further relaxed for Hybrid vehicles.

The Loan to Value Ratio will be revised and the finance facilities can be provided by banks up to:

50% of the value - for petrol and diesel motorcars

70% of the value - for hybrid cars

90% of the value - for electric cars

VAT liability on sale of Condominium Housing Units

The sale of a Condominium Housing Unit will be liable for VAT from 1 April 2018. However, a sale under a sales agreement entered into before 1 April 2018 will not be liable for VAT.

Duty on locally assembled vehicle will remain as 30% and not 40% as announced in the Budget on 9 November.