Sri Lanka has reduced import duties on 800 and 1000cc cars while increasing duty on higher engine capacity cars, a move likely to benefit India-made smaller vehicles.
Prices of vehicles above 1000cc 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 1000 cc cars would have a lower import tax band.
A majority of this category imports are dominated by the 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.
The 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 would rise up to above 7.6 million Sri Lankan rupes.
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.