The Government has introduced new luxury tax guidelines for motor vehicles, which will be applied based on factors such as engine type, passenger capacity, age, and modifications.
On Friday (31 January) the Fiscal Policy Department published several gazette notices in this regard, including a regulation under Section 51 of the Finance Act No.35 of 2018 and an order under Section 3 of the Excise (Special Provisions) Act No.13 of 1989.
Additionally, the Department of Trade and Investment Policies has released a gazette concerning a surcharge on Customs import duties.
The Fiscal Policy Department also issued an order under the Finance Act No.25 of 2003.
According to the Finance Ministry, diesel or semi-diesel vehicles transporting 10 or more passengers will have a luxury tax-free threshold of Rs. 5 million, with tax rates reaching 120% for modified vehicles.
Hybrid vehicles that combine diesel and electric engines are subject to a higher exemption threshold of Rs. 5.5 million, with tax rates of 90% for modified vehicles.
Petrol-electric hybrid vehicles will face a lower modification tax rate of 80%.
Additionally, vehicles designed for 13-25 passengers will be taxed based on age, with newer vehicles facing higher rates while older ones may be exempt from tax.
In addition to the luxury tax changes, the Finance Ministry has revised excise duty rates on motor vehicles, effective from yesterday (1).
The new rates vary depending on the type, age, and power of the vehicle. Electric auto-trishaws will be taxed at Rs. 18,100 per kW for those under one-year-old and Rs. 24,100 per kW for older vehicles, with those older than two years facing a higher rate of Rs. 36,200 per kW.
A similar structure applies to electric motor cars, with taxes depending on power capacity.
Vehicles with motors under 50 kW will be taxed at Rs. 18,100 per kW for newer vehicles and Rs. 36,200 per kW for older ones, while those between 50-100 kW will face taxes of Rs. 24,100 per kW for new cars and Rs. 36,200 per kW for older models.
Vehicles with motors between 100-200 kW will be taxed at Rs. 60,400 per kW, while those above 200 kW will incur the highest rates – Rs. 96,600 per kW for new vehicles and Rs. 132,800 per kW for older vehicles.
Furthermore, the Government has imposed a 50% surcharge on Customs import duty for specific imported vehicles, including motor cars, ambulances, and auto-trishaws, effective from yesterday. This surcharge will remain in effect for one year.