Import of used vehicles: experts raise question over ST rate

A question has been raised by tax experts whether there is a need to change the fixed assessment values of duties and taxes on the import of old and used vehicles following reduction in sales tax from 17 percent to 16 percent in budget 2011-12. Sources told Business Recorder here on Saturday that the Federal Board of Revenue (FBR) has reduced sales tax from 17 to 16 percent.
The regulatory duty (RD) was imposed on 397 items through SRO 482 (1)/2009 dated 13.6.2009. The RD was removed on all items except betel nuts, cigarettes, luxury tiles & bathroom fittings, luxury vehicles (1800 CC & above except electric hybrids) and arms/ammunition by amending SRO 482(1)12009. Presently, SRO 577(I)/2005 had fixed duties and taxes in US$ or equivalent amount in Pak rupees on the import of old and used cars from 800cc to 1601cc to 1800cc (excluding jeeps).
The FBR has specified six different slabs for assessment of duties and taxes on the import of old and used vehicles. The duties and taxes included customs duty, sales tax and withholding tax etc. A cumulative amount has been specified in US dollars to avoid assessment disputes between the importers and customs department.
Legally, there is a no compulsion on the customs authorities to revise the SRO.577(I)/2005 as this notification is an exemption notification which says that, 'the Federal Government is pleased to exempt old and used automotive vehicles on the imports from so much of the customs duty, sales tax and withholding tax as are in excess of the cumulative amount specified in the notification'. The basic standard rate of sales tax was 17 percent which has now been reduced to 16 percent. As SRO.577(I)/2005 exempts vehicles up to a certain extent, it is not compulsion for the tax department to revise the rates as per SRO.577(I)/2005.
In budget (2011-2012), the Board has reduced sales tax from 17 to 16 percent. A question arises whether there is a need to pass on the benefit of one percent reduction in sales tax to the importers of old and used vehicles by reviewing the existing fixed slabs as per SRO.577(I)/2005. A tax expert said that the assessment value of the old and used vehicles has been taken on the lower side under SRO.577(I)/2005 to avoid classification/assessments disputes. The average value of vehicle has been fixed on comparatively lower side. The actual value of vehicles for assessment of duties and taxes is on the higher side as compared to the notified values under SRO.577(I)/2005.
The working of duties and taxes under SRO.577(I)/2005 was done on the basis of previous standard rate of sales tax. Now the sales tax rate has been reduced by one percent, the FBR can examine the possibility of working out reduced slabs of cumulative duties and taxes, if necessary, tax expert added.