Anomalies in sales tax laws impede Hybrid cars imports

Anomalies in the sales tax laws are holding back local car manufacturers from introducing Hybrid Electric Vehicle (HEV) in Pakistan as the tax relief recently announced by the government is only applicable at the import stage for Hybrid vehicles and not on subsequent sales, according to stakeholders here.
This has put car assemblers at a disadvantage when compared with the relief provided to commercial importers; assemblers said adding that this has put them at a disadvantage in view of the fact that importers are abusing the used car import policy meant for overseas Pakistani.
SRO 499 (1) /2013 only provides a tax benefit at the import stage for HEVs and not on retail stage and since assemblers will be importing the vehicles and then selling them subsequently to end users, they will have to pay full sales tax at the prevailing rate of 17 percent, whereas a commercial importer will only have to pay 50 percent ie 8.5 percent sales tax at import stage instead of 17 percent. Resultantly local assemblers, who are fully documented, will not be able to benefit from government's announced tax relief to the end customers on imported HEVs.
Car assemblers, it is learnt, have requested the Ministry of Finance to rectify this anomaly as soon as possible and ensure a level playing field for them. Assemblers have already planned that brand new Hybrid vehicles will be provided with complete warranty and after sales support, thereby providing peace of mind to customers. Indus Motor Company (IMC) has already planned to unveil imported brand new hybrid car this year while Honda Atlas Cars are also reportedly considering introducing hybrid cars in the country.
In FY2012-13, around 2,800 used Toyota Prius had arrived in the country. In the budget 2013-2014, the government put import duty and sales tax on hybrid cars up to 1,200cc at zero percent sales tax while there was 50 percent off in duty on hybrid cars for 1,201-1, 800cc followed by 25 percent off in 1,801-2,500cc.
Industry sources said that approximately 90 used Hybrid vehicles were imported under used cars policy in July 2013 which does not provide any warranty or after sales support to the consumers. In addition to this more 1000 cars were imported during the month of October.
Contrary to this, car assemblers importing new Hybrid vehicles will be providing full backup support including spare parts, after sales service and warranty. Government should take the manufacturers on board to finalize a policy regarding hybrid vehicles to provide benefits to the consumers, they said.