Auto industry seeks tax relief at retail stage

Published: April 22, 2017


LAHORE: The Pakistan Automotive Manufacturers Association (Pama), in its budget proposals for the upcoming fiscal year, has asked the government to remove anomalies in SRO 499, which has put the documented taxpaying auto industry at a serious disadvantage.

According to the association, the provisions of SRO 499 only extend duty and tax relief at the import stage and not at the subsequent retail stage.

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This anomaly results in Original Equipment Manufacturers (OEMs) paying full 17% general sales tax at the retail stage in addition to the income tax, whereas used car importers are paying low fixed duties and taxes.

The proposal suggests that SRO 499 should be restricted to new hybrid electric vehicles (HEVs) only and incentive should be extended to OEMs at the retail stage to encourage the documented OEMs.

Previously, the government offered duty and tax concessions on the import of HEVs in June 2013 when global oil prices were at $100 per barrel.

At that time, Pakistan’s trade deficit stood at $15.3 billion and the contribution of oil imports to the overall import bill was 35%. Average HEV imports were at less than 2,000 units per year at that time.

Last year, approximately 11,000 hybrid vehicles were imported, costing around $160 million which was allegedly sent through illegal channels and the State Bank of Pakistan (SBP) also acknowledged as the official import data did not reflect the amount.

Realising the damaging impact on the economy, the SBP has now proposed certain measures to curb the illegal used car imports.

Meanwhile, industry experts highlighted that SRO 499 never served its purpose as oil prices went down drastically from $100 per barrel in 2013 to $50 at present. The extent of damage to Pakistan’s economy has been significant during the past four years as close to 40,000 HEVs have been imported, costing approximately $500 million.

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On the other hand, OEMs’ share in HEV sales is almost non-existent, mainly because the law, under which concessions are allowed, doesn’t give a level playing field to the documented OEMs.

Published in The Express Tribune, April 22nd, 2017.

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