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India concern over Sri Lanka’s tax raise for vehicle imports

Indian officials have expressed concerns about recent moves by Sri Lanka which increased duty on Indian vehicle import into the country.

Sri Lanka has increased the duties for imports of vehicles from India, while giving exemptions to imports from Japan, reported the Sunday Times last month.

The paper also reported that a Chinese company was given clearance to set up a car plant.

A spokesperson for the Society of Indian Automobile Manufacturers (SIAM) said Sri Lanka has nearly doubled the import tax on vehicles manufactured in India, and if reports about the Chinese plant proved correct, vehicles could be imported into India tax free due to the South Asian Free Trade Agreement.

“This effectively means the Chinese company setting up a plant in Sri Lanka can export automobiles to India at zero import duty. If that happens, we will be hit from all sides,” said a SIAM official.

The Indian government has said it will attempt to work through diplomatic channels to bring down import duties.

“India is mulling various options to deal with the situation. One of the options is to approach purely diplomatically, and request the Sri Lankan Government because it is a win-win situation if they cut down the tariff,” Additional Secretary in the Commerce Ministry, Rajeev Kher told reporters in Delhi.

“Sri Lanka is a very important market as far as cars and commercial vehicles are concerned. Obviously, we are concerned about it. We believe that the very substantial rise in import tariff in Sri Lanka is going to adversely affect our car exports to that country,” he added.

Over 13% of Indian cars are exported to Sri Lanka. The Indian vehicle industry is reported to have now scrapped plans to organising a car exhibition on the island.

Meanwhile, the Indian government said in a statement it is conducting military training exercises with the Sri Lankan Army and “is pursuing an approach keeping in view all aspects of national interest”.

“Short-term and long-term training programmes, in technical and non-technical streams are conducted for Armed Forces personnel of foreign countries including Sri Lanka,” said the statement.

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