CMTA advocates removal of 15% depreciation and enforcement of 3-month registration policy to mitigate revenue leakage

The Ceylon Motor Traders’ Association (CMTA), the senior-most automotive association in South Asia affiliated with the Ceylon Chamber of Commerce, has called on the government of Sri Lanka to abolish the 15% depreciation that is currently granted on used vehicle imports.  

The CMTA emphasizes that this policy not only lacks any plausible justification but also results in significant revenue losses to the government.  While no official announcement has been made in regard to the removal of the 15% depreciation, the CMTA has consistently raised this issue through multiple budget proposals, submitted by the Ceylon Chamber of Commerce.  

The Association maintains that the depreciation should not be applied to used vehicle imports. The reason being that most of the used vehicles imported, have virtually zero milage and are priced almost on par with brand-new vehicles, when considering Cost, Insurance and Freight (CIF) value.

Currently, the used vehicle market enjoys a 15% depreciation on the CIF value for duty calculation purposes. The CMTA stresses that such a concession distorts fair market competition, as it effectively allows used vehicles to be brought in at lower duty rates, despite having comparable CIF values to brand-new vehicles.

The CMTA acknowledges the government’s intention to make vehicles more affordable to customers but cautions that such measures must be implemented in a structured and justifiable manner. If affordability is the objective, then similar concessions could also be extended to brand-new vehicles as well through authorised agent.

Customers purchasing brand-new vehicles benefit from additional cost savings, as most dealers offer a five-year manufacturer’s warranty, reducing maintenance and repair expenses during the first five years of ownership. This also results in savings of foreign currency for the government, since repairs and parts replacements are covered under warranty and reimbursed by the manufacturer rather than requiring external expenditure.

Referring to the gazette issued in 2013, the CMTA reiterates that any depreciation should be based on a structured table that considers the vehicles age, with a maximum cap of no more than 10%. The Association states that this approach ensures fairness and prevents abuse of the system.

Another gazette issued stated that any vehicle that is brought into the market as to be registered within three months. If vehicles are not registered within that period, penalties ranging from 4% to 40% can be incurred, depending on period the vehicle is left unregistered. The reason for this, was to ensure that vehicles were imported only to meet customer demand, and to mitigate the large amount of foreign currency that is spent on stockpiling vehicles.

Highlighting broader economic implications, the CMTA warns that the 15% policy creates significant revenue leakage for the government. Thus, it is the CMTA’s recommendation that this depreciation be removed altogether.

However, if the government wishes to continue offering a concession to the used car market, The Association emphasises that it should applied via a transparent, structured framework that is both economically sound and aligned with national revenue objectives. The CMTA is more than willing to work with and support the government to in implementing this framework.

Source: Adaderana