“Lower tariff for spare-part imports and TIEP scheme” | Page 2 | Sunday Observer
To sustain vehicle industry

“Lower tariff for spare-part imports and TIEP scheme”

21 November, 2021

Lawmakers should consider lowering the import levy to enable vehicle spare part imports to support the automobile industry which is in the doldrums due to the ban on import of vehicles, said Ideal Group Chairman Nalin Welgama commenting on Budget 2022 which was presented last week.

He said facilitating import of spare parts at a lower import tariff will help give a fresh look at vehicles in the country and enable merchants to keep head above water.

“The revenue from vehicle imports amounting to around Rs. 1 billion a year in the five years before the ban should be an investment to facilitate and support the automobile industry,” Welgama said, adding that facilitating import of registered vehicles from Japan under the Temporary Import for Export Processing (TIEP) scheme would help the continuity of the industry. TIEP or Inward Processing (IP) scheme permits businesses to obtain relief from Customs Duties and import VAT on goods that are imported to be used as inputs to manufacture/process/assemble produce for export from Sri Lanka. Lawmakers could also look at entrepot trade to facilitate exports of used imported vehicles.

Merchants who thrived on sales of used vehicles for a short time during the import ban pinned hopes on the Budget which according to  importers was a damp squib. “Our hopes were dashed again as there wasn’t anything to revive the motor industry other than an ‘accident tax’ to boost revenue of the state coffers,Vehicle Importers Association of Lanka President Indika Sampath Meerenchige said. Vehicle accidents will be taxed under the new revenue measures proposed through the Budget to maintain the budget deficit at 8.8 percent of GDP in 2022, down from 11.1 percent this year.

The Vehicle Importers Association of Sri Lanka had proposed measures to resuscitate the industry that brings revenue to the state coffers by way of duties. The Association’s proposals include a  long-term solution for vehicle imports, prevention of tax evasion of vehicle manufacturing and assembling industries, introduction of the Government Approved Automobile Importer (GAAI) certificate and control of local vehicle prices.

The automobile industry called upon lawmakers to consider a quota system for imports as a viable solution to check excessive imports and a revision in the Loan to Value ratio from the current 70 to 40. However, there have been reservations expressed on vehicle import taxes to be paid through foreign currency to stem its outflow as it could lead to reduction in the inflows of dollars to the country and also malpractices.