|Indian vehicles at Sri Lanka;s Hambantota port|
Number of major media outlets published reports on Sri Lanka raising taxes for Indian vehicles and providing favourable conditions to other countries. Some reports hints of India exerting diplomatic pressure in order to reduce the taxes and some others criticise the government inactivity over the issue.
Political observes suspect whether Sri Lanka is taking a revenge on India for its expressed concerns on deteriorating human rights situation in Sri Lanka and especially its support for the Sri Lankan Tamil minority demand for autonomy.
First Post site quoted Additional Secretary in the Commerce Ministry Rajeev Kher saying that “There are many options, one option is to approach purely diplomatically, and request the Sri Lankan government because it is a win-win situation if they cut down the tariff”
The Times of India report says that 100% tax increase by GoSL is a continuation of earlier move to increase tax on small vehicles and two wheelers. ”Sri Lanka, one of the key export destinations for Indian auto manufacturers, has raised import duty on vehicles, making companies jittery just as the government looks to take up the matter. Sri Lanka has increased import duty on commercial and utility vehicles by over 100% and this comes after a similar move on two-wheelers and small cars in April.”
Providing detail break down of the tax regime imposed recently The live Mint and the Wall Street Journal said that ”The move, which dates back to early November but is just coming to light, doesn’t single Indian firms out, but affects them the most because they account for 95% of the auto market in the island nation.
”Through 2012, Sri Lanka has made it difficult for Indian auto exporters, first by increasing import duty significantly in April, and following up with the increase in excise duty.
”Sri Lanka has increased excise duty on utility vehicles to 173% from 100% previously. Total duty on cars less than 1,000cc increased from 120% to 200%, including a 47% increase in excise.
The excise on three-wheelers was raised from 45% to 100%, and on two-wheelers from 61% to 100%. Colombo has also imposed an absolute levy of Sri Lankan rupees 109,000 on commercial vehicles, besides a 12% excise duty. The new structure came into effect on 9 November.”
Under the head line ‘Auto industry cries foul on Sri Lanka’s ‘anti-India stand ‘ the Money Control site said that this could be a beginning of a trade war. ” The Indian auto industry has decided to scrap plans of organising an auto show in Sri Lanka after five years owing to the high duty rates in the country. The industry alleges that Sri Lankan government has adopted an “anti-India” stand in favour of China, reports CNBC-TV18’s Ronojoy Banerjee.”
”This is clearly turning out to be what many believe a possible trade war between India and Sri Lanka.”