The Ceylon Motor Traders’ Association (CMTA), the oldest automotive association in South Asia and a member of the Ceylon Chamber of Commerce, has urged the Sri Lankan government to eliminate the 15% depreciation currently applied to used vehicle imports.
The CMTA argues that this policy not only lacks a credible rationale but also leads to substantial revenue losses for the government. Although no formal announcement has been made regarding the removal of this depreciation, the CMTA has repeatedly highlighted the issue in various budget proposals submitted by the Ceylon Chamber of Commerce.
The Association contends that depreciation should not be granted for used vehicle imports, as many of these vehicles have nearly zero mileage and are priced similarly to brand-new vehicles when considering their Cost, Insurance, and Freight (CIF) value.
At present, the used vehicle market benefits from a 15% depreciation on the CIF value for duty calculation. The CMTA emphasizes that such a concession distorts fair market competition, as it allows used vehicles to be imported at lower duty rates, despite having CIF values comparable to new vehicles.
While acknowledging the government’s aim to make vehicles more affordable, the CMTA advises that such measures should be implemented in a structured and justifiable manner. If affordability is the goal, similar concessions could be extended to brand-new vehicles through authorized agents.
Purchasers of brand-new vehicles enjoy additional cost savings, as most dealers provide a five-year manufacturer’s warranty, which reduces maintenance and repair expenses in the initial years of ownership. This also saves foreign currency for the government, as repairs and parts replacements are covered under warranty and reimbursed by the manufacturer, avoiding external expenditures.
Referring to the 2013 gazette, the CMTA reiterates that any depreciation should follow a structured table that considers the vehicle’s age, with a maximum limit of 10%. The Association believes this approach ensures fairness and prevents system abuse.
Another gazette mandates that any vehicle imported must be registered within three months. Failure to register within this period incurs penalties ranging from 4% to 40%, depending on the delay. This measure aims to ensure vehicles are imported to meet customer demand and to reduce the significant foreign currency spent on stockpiling vehicles.
Highlighting broader economic implications, the CMTA warns that the 15% policy results in significant revenue leakage for the government. Therefore, the CMTA recommends the complete elimination of this depreciation.
However, if the government decides to continue offering concessions to the used car market, the Association stresses that it should be applied through a transparent, structured framework that is economically sound and aligns with national revenue goals. The CMTA expresses its willingness to collaborate with the government in implementing this framework.
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