CBR notification in violation of budget announcement: cut in duty on imported cars

A recent notification of the Central Board of Revenue (CBR) "to facilitate clearance and to prevent any manipulation in the prices of imported cars" is in violation of the announcement in the Budget 2004-05 about duty reduction on different makes of cars and has made it impossible for people to import cars of different makes, trade sources said.
Importers are asked to pay custom duty in dollars and on the basis of engine capacity (cc) in certain cases, and on the basis of the make in others.
Different brands/makes with same capacity have different duty/taxes structure. The rationale of this discretion and distortion has, however, not been explained in the notification.
Automobile marketing sources on Sunday said that international practice of levying taxes/duties on import of cars is always on the basis of capacity and not on its make or brand.
They have demanded levy of duty/taxes on the imported cars only on the basis of its capacity.
They said, for example, the proposed duties/taxes on a Mercedes Benz 10-seat coach, on the basis of its make, is $7000 whereas a lower and lesser known make of 1300 cc is to be charged $10,000. "This ambiguity is common in the Custom General Order. It is detrimental to the spirit and intentions of the announcement, as relief, contained in the budget speech of the finance minister," sources said.
They said that the mechanism for charging duties on imported cars prescribed by the CBR is discriminatory and deceptive and is explicitly in favour of local manufacturers who are neither prepared to rationalise their price structure nor willing to curb exorbitant premium being charged by their dealers.
Importers who have booked CBU units and are awaiting shipment would now be put to hardship when their consignments arrive as the advantage of the ambiguity in the CGO and its interpretation would benefit custom officials and, at times, the importers. But the government would remain a loser.
Sources said that in violation of Section 18 of the Custom Act 1969 any amendment in the mode of payment or in the currency description cannot be changed by Customs General Order as has been done by CGO No 06/2004 - fixation of levy of duty and taxes on imported automotive vehicles (CBU condition) in US dollars.
The order says: "It is intended to facilitate clearance and to prevent any manipulation in the prices of imported cars". The CGO has categorically mentioned makes of cars/jeeps, existing duty and the proposed duty and taxation--in dollars.
The order suffers from two obvious ambiguities. One, the category of cars has been bracketed under capacity from 800 cc to 1800 cc and above. The other category is according to the make of car.
Makes of the cars include Honda, Toyota, Toyota Land Cruiser four editions of Mercedes, Mercedes coaches and Chinese trucks 3000 cc and Mitsubishi Pajero.
There are makes such as Audi, Volvo, BMW, Land Rover, Nissan and many more, which have not been mentioned in the CGO. As these prestigious and expensive cars are not mentioned in the CGO, would they be charged duties/taxes according to their capacities? If so, would they be cheaper in price as compared to a less expensive and lower in quality car mentioned by make/brand in the CGO?
For example, import duty on Mercedes Benz S320 of 3200cc has been prescribed as $130,000 in the CGO whereas on the import of Mercedes S350 3200cc (not mentioned in the CGO) would fall in the category of 'Above 1800 cc' on which the duty/taxes amount to $27000. With a slight variation in the name the two cars of the same family there would be wide difference in prices. Also, the S350 version is an improvement over S320.
Market sources said that the CGO provides ample opportunity for customs officials to interpret it according to their convenience. "This will breed corruption," they added.
The depreciation, according to the CGO, allowed on used/second-hand cars, in the form of reduction in the fixed amount of customs duty/taxes in US dollar at the rate of 1 percent for each completed month or 10 percent per annum calculated from the date of the first registration abroad up to the date of the entry into Pakistan subject to maximum of 50 percent depreciation on vehicles more than five years old needs more clarification.
The second-hand car dealers said that those who import 18 months old cars will be subjected to the discretion of customs officials. They may or may not interpret the order according to the convenience of an importer. The reduction in duty/taxes on cars falling under this description will either be 20 percent, if period of more than five months is considered as one year, or just 16 percent if one year and six month are taken into account separately.
The amount of customs duty, sales tax, withholding tax and CVT chargeable on imported vehicles may be charged in US dollar as per following scales notified under the CGO. A cursory glance on the chart shows the variation in the proposed duty and taxes on the basis of capacity and on the basis of make of a car.

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New Cars/Jeeps                                   Existing Duty  Proposed Duty

                                                                    and taxes

                                                                       in US$

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Up to 800 cc                                     50% ad val              4000

Up to 1000 cc                                    50% ad val              5000

Up to 1300 cc                                    50% ad val            10,000

Up to 1600 cc                                    70% ad val            18,000

Up to 1800 cc                                    80% ad val            22,000

Above 1800 cc                                    100% ad val           27,000

Honda Accord 2000 cc                             100% ad val           33,000

Toyota Mark-II 2000 cc                           100% ad val           34,000

Toyota REV-4 Jeeps 2000 cc                       100% ad val           36,000

Mercedes Benz C200 2000 cc                       100% ad val           66,000

Mercedes Benz C240 2500 cc                       100% ad val           70,000

Mercedes  Benz E240 2500 cc                      100% ad val           80,000

Mercedes Benz S 320 3200 cc                      100% ad val          130,000

Toyota Hilux Surf 2779 cc                        100 ad val            38,000

Toyota land Cruiser Prado Jeep 2779 cc           100% ad val           30,000

Toyota land Cruiser Prado Jeep 3000 cc           100% ad val           49,000

Mitsubishi Pajero 2834 cc                        100 % ad val          58,000

Mitsubishi Pajero 3000 cc                        100 ad val            55,000

Toyota Land Cruiser Jeep 4183 cc, domestic       100% ad val           70,000

Toyota Land Cruiser Jeep 4163 cc, export         100% ad val           60,000

Toyota land Cruiser Jeep 4200 cc                 100 ad val            70,000

BMW X5 Jeep                                      100 ad val            74,000

New Toyota Hilux Pickup 2987 cc                  60% ad val            22,000

Diesel Bus 70 capacity without A/C Chinese origin20% ad val            10,000

Mercedes Benz coaches 15 seater                  20% ad val              8000

Mercedes Benz coaches 12 seater                  20% ad val              8000

Mercedes Benz coaches 10 seater                  20% ad val              7000

Toyota Hiace Commuter 15 seater                  20% ad val             8,500

Changen Brand Mini Pickup 797 cc                 60% ad val              2000

Faw Brand Chinese truck 3000                     60% ad val            10,000

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