Collectors told not to charge 10 percent FED on car ACs

After a delay of over 40 days, the Federal Board of Revenue has informed the collectors of customs not to charge 10 percent Federal Excise Duty on cars air-conditioners, giving customs an opportunity to charge the levy at the import stage between June 6 - July 16, 2010.
Sources told Business Recorder on Saturday that the FBR has issued instructions to the Model Customs Collectorates (MCCs) on non-applicability of the FED on air conditioners used in automobiles. According to the FBR instructions 10 percent FED on electricity intensive home appliances ie, air conditioners and deep freezers was not intended for auto air conditioners in the budget 2010-11, therefore, the same is not included in the scope of subject levy, FBR directive added.
The FBR instructions have been issued after a prolonged delay when some of the cars manufacturers have reportedly increased the prices of cars incorporating 10 percent FED on cars air conditioners. The FBR instructions seemed to be issued in the backdrop of cases where MCCs had started collection of the FED on clearance of cars air conditioners. Some assemblers increased prices of cars after incorporating 10 percent FED from June 6, 2010.
Sources said that the delay in the FBR clarification has already created confusion in the market about the charging the FED on cars air conditioners. If the FBR had specified non-chargeability of the 10 percent FED on cars air conditioners in the FBR Sales Tax Budget Instructions, the board had averted such confusion among customs officials at ports and cars assemblers. Some car manufacturers had passed on two impacts ie imposition of FED on car air-conditioners and one per cent hike in general sales tax from 16 to 17 per cent to the consumers.
The FBR Sales Tax Budget Instructions had specified that the Federal Excise Duty @ 10 percent has been levied on electricity intensive home appliances by amending Table 1 of First Schedule to the Federal Excise Act, 2005. The measure shall take effect from June 6, 2010. If the said FBR Sales Tax Budget Instructions have been issued to the field formations specifying that cars air conditioners would be exempted from 10 percent FED, the collectors of customs can properly impose the levy within the scope of the decision announced in budget, budget instructions added.
Similarly, the FBR summary moved to the federal cabinet for the approval of the taxation measures announced in budget (2010-11) has not elaborated the applicability of 10 percent FED on air conditioners. The FBR had informed the cabinet that an estimated amount of Rs 3.4 billion would be collected by levying 10 percent FED on electricity-intensive home appliances. Presently, Pakistan is facing acute shortage of electricity. Various measures have been taken to reduce the consumption of electricity ensuring that the burden of these measures does not affect the common man. There are various electricity-intensive home appliances like air conditioners, electric water coolers, refrigerators, deep freezers, electric microwave ovens and television sets.
Most of these appliances are used by, common man except air conditioners and deep freezers. Therefore, federal excise duty at the rate of 10 percent has been levied on manufacturing and import of air conditioners and deep freezers, which will result in reduction of electricity consumption, and generate some extra revenue for the government exchequer, the FBR added. On receiving some complaints on wrong applicability of the FED on cars air conditioners, the FBR has issued a clarification to the MCCs and FBR Members Domestic Operations North/South.