The Ceylon Motor Traders Association (CMTA) will be making representations to the Finance Ministry shortly, calling for a reduction on excise duty for commercial vehicles at a time when top officials believe the majority of vehicle sales are being fueled by duty - free permits.

The Association is currently in the process of formulating proposals to the Ministry, under the portfolio of President Mahinda Rajapakse, to reduce or remove Budget 2013’s 15% tax on commercial vehicles.

“The issue that we are focusing on currently is the 15% duty on commercial vehicles like trucks. We are critical of this move by the government because the use of commercial vehicles has a direct beneficial impact on the country’s economy and that is why you won’t have such vehicles being taxed in any other country.

This is an area that we will be making an appeal to the President about,” Ceylon Motor Traders Association Chairman Tilak Gunasekera said.

He further said that once proposals for commercial vehicles were submitted, the Association would go on to make representations to lower duties on other categories of vehicles which reached unprecedented levels following Budge t2013.

 “The industry is definitely suffering as a result of these high taxes but as an Association we decided to support the government in increasing duties as we felt that it would be best for the economy. However at present, I would say that most of current vehicle sales are based off concessionary permits without which many companies would be selling as little as 5-6 units a month.”

“At the time, the government stated that they had to increase taxes in order to support the country’s balance of payments situation; however we’ve since seen a significant improvement in that area, so we feel that it is reasonable to propose at least a slightly lowered tax regime,” Gunasekera said.

Despite the industry’s current ailments, Gunasekera stated that the Association’s first priority would be to secure a reduction in taxes on commercial vehicles first, and if successful, it would then go on to make representations in other vehicle categories.

Meanwhile, responding to rumors that vehicle tax increases had been targeted at Indian origin vehicles, Gunasekera vehemently denied any such action.

“Frankly, these tax increases are affecting manufacturers of all origins, not just India. It is a completely false misconception to think that the government would intentionally target Indian manufacturers, although I understand that from their point of view, vehicle sales increased by 70% in 2011. So, after such a sharp rise in sales for taxes to suddenly curb sales, they would feel that they are targeted but it is simply not the case.”

“If there was a specific tariff that stated that only Indian origin vehicles would be taxed, then yes they would be targeted but no such provisions exist,” Gunasekera argued.

When contacted by Mirror Business, Group Managing Director of Associated Motorways (AMW), Samantha Rajapaksa, importers of Suzuki Maruti cars declined to comment.

“We understand that at present there are discussions going on at the diplomatic level and there is a lot of media attention on this area. Therefore we would prefer not to bring our own comments to the dialogue at this time,” Rajapaksa stressed.

Vehicle sales in Sri Lanka have continuously declined following a series of tax increases, first in April of this year followed by further measures introduced through Budget 2013.

Subsequently, prices of vehicles rose across the board, with duty on cars increasing to between 200%291%, whilst the SUV category saw increased from 100% to 173%. Duty on three-wheelers also nearly doubled to 100%. The new tax regime resulted in an erosion of sales of up to 40-50% in the motorbike category, 70% in cars and an overall 50% drop in vehicle sales across all segments.

The Indian government has since initiated discussions at a diplomatic level to secure concessions for the Sri Lankan market which currently accounts for approximately US$ 800 million of India’s US$ 6 billion vehicle export industry.