With the arrival of more ships laden with imported cars, the congestion at the Karachi Port has increased as over 6,000 cars await clearance.
In this connection, car importers are meeting Federal Board of Revenue (FBR) Chairman Ali Arshad Hakeem today (Friday) where they will try to convince him to end the four-week standoff between the importers and taxmen.
Until last week, around 3,000 cars were standing at the port, but their number swelled with the arrival of two ships, which added 3,000 more cars.
The delay in clearance has blocked billions of rupees in customs duty on imports. Port authorities are equally perturbed, who have threatened that the cars could be confiscated and auctioned if the importers do not clear them.
The importers considerably slowed down the clearance of cars following issuance of a Customs General Order (CGO) on August 31, which reduced the depreciation limit on cars.
From September 1, the FBR started calculating depreciation on used cars at 48% of the value, down from 60% which considerably increased vehicle prices. Low percentage of depreciation means higher car prices and this is what worries the importers.
As a result of CGO, the customs duty on 660cc to 1,000cc cars will increase by Rs60,000 and the list goes on as the engine capacity of vehicles grows.
The importers argue that the government cannot enforce the CGO on cars which were imported before August 31.
For weeks, the importers were desperately trying to take time from the FBR chairman because their last meeting on September 13 had proved unfruitful in which the chairman verbally assured them that the matter would be resolved soon.
Talking to The Express Tribune, All Pakistan Motor Dealers Association Chairman HM Shahzad said the standoff with the FBR had badly hit importers, who would have to pay demurrage due to delay in clearance of cars.
The delay hurt the government as well as a huge amount of over Rs18 billion in customs duties has been stuck, he said.
The importers also blame the local car assemblers for being behind the saga, believing that the FBR took the decision on the insistence of assemblers. The import of a large number of vehicles has annoyed the assemblers, who think that imports are directly hitting their market share. Leading assemblers acknowledge that the demand for locally manufactured cars has dropped sharply in July mainly because of higher sales of used Japanese cars in the market.
In financial year 2011-12, over 55,000 cars were imported in the country, up 162% from 21,000 cars imported a year earlier.
Published in The Express Tribune, September 28th, 2012.