Government may further restrict used cars' import in coming budget

The government may further restrict used cars import in next budget by cutting depreciation limit from 2 percent to 1 percent and reducing their life from three to two years, it was learnt.
According to existing policy, the government has allowed import of 3-year old used cars with 2 percent depreciation. From now onwards the Engineering Development Board (EDB) is mulling over a proposal to take these steps in the next budget aimed at limiting used cars import.
The proposal also included registration of vehicle in the name of returning Pakistanis for at least one year and withdrawal/review of partial exemption of duty and taxes on assessment of used vehicles under SRO 77(1)/2005 dated June, 6 2005 to sustain the sales of locally produced cars.
The depreciation rate for corporate sector on vehicles under the Income Tax Ordinance, which is very low @15 percent on reducing balance method be increased to 25 percent per annum with an initial depreciation @50 percent in the year of purchase of new car.
To benefit the local industry, it was proposed sales tax included in the cost of locally produced cars purchased by the corporate sector is allowed to be adjusted against the output tax of the concerned registered entity.
It is proposed that such components, which attract lower statutory rate than Completely Knocked Down (CKD) should be allowed to be imported at lower rates, if imported as part of the kit. The industry also wanted some changes to SRO.656 (1)/2006 by adding "provided that for the parts attracting lower rate of statutory duty, the manufacturers/assemblers shall be allowed to get those parts cleared at such lower statutory rate".
There was also a proposal of withdrawal of excise duty that was imposed on auto-industry through Finance bill in 2006 with insertion of "franchise services" in the Table-II of schedule I of the excise act, 2005.
The local auto industry was also asked to pay the said duty. This may be withdrawn for local industry in the coming budget on their demand, saying it would adversely affect major foreign investment in the country.