Nov 23, 2010 (LBO) - Sri Lanka has made electric and hybrid cars duty free, while a cut in value added tax and higher rates of depreciation allowed for used cars in the 2011 budget will make both brand new and used vehicles cheaper, analysts said.
Sri Lanka cut the maximum rate of value added tax to 12 percent from 20 which will reduce the import tariffs paid on all cars, though some commercial vehicles were already on the lower duty.
President Mahinda Rajapaksa said electric and hybrid vehicles will be completely freed from excise duties and value added tax to promote environmental friendly vehicles.
Motor homes will also be made duty free, according to the budget document.
The depreciation tables used to calculate duty on used cars will also be increased which will reduce total levies paid, industry analysts said.
Sri Lanka allows cars up to three years old to be imported. Now three year old cars will be depreciated 60 percent compared to about 80 percent earlier, two year old cars will depreciated.
The budget speech said the depreciation tables will comply with World Trade Organization rules.
State and public sector workers will get duty free concessions for the import of cars.
Levies for the smallest cars are slightly over 80 percent, while mid sized cars attract rates over 100 percent.
Rulers and lawmakers get tax free cars.