Sales Tax Act, 1990: Paapam rejects inclusion of auto parts in Third Schedule

Seeking reversal of adverse budgetary measures, the Pakistan Association of Auto Parts and Accessories Manufacturers (Paapam) has rejected the inclusion of auto parts, accessories and Tyres in the Third Schedule of the Sales Tax Act, 1990. Paapam Chairman, Munir Bana, regretted the government's decision to make it mandatory for local manufacturers to charge sales tax on retail prices at the time of supply of auto parts.
"Under the new budget, the Third Schedule of Sales Tax Act requires that local Auto Parts Manufacturers shall print maximum retail prices and pay sales tax thereon," he said in a statement on Thursday. "It is regrettable that this would not be applicable on the importers, who are neither documented nor pay their full share of taxes. This discrimination against a fully documented local industry will render us uncompetitive against importers and drive us out of the market," he said.
"The rate of sales tax has been increased by one percent and this has already made our products costlier and shrunk our market share. Besides, shifting of responsibility on manufacturers for collection of retailer's taxes and working as withholding agents for income tax, sales tax & FED also means incurrence of extra cost, because all these activities required dedicated staff and other resources," he added.
Chairman Paapam said it was the government's responsibility to support the local industry and, therefore, the Third Schedule should be made applicable to sale of both local and imported auto parts, or, alternatively, locally manufactured auto parts should immediately be excluded from the Third Schedule of the Sales tax Act 1990.
Paapam Vice Chairman, Usman Malik, said the association was of the view that auto parts and accessories should not be classified in the Third Schedule because local manufacturers had to compete with imported parts, which were under-invoiced, mis-declared and cleared on weight basis, and thus we have to give discounts and vary prices in different markets." Malik added that only 10 percent of the Rs 40 billion market was available to Paapam and if Sales Tax was charged on discounts, incentives, transport etc , local manufacturers would lose even that small share of the market, cash flow of the members would be adversely affected and even the government would lose revenues, due to decrease in sale.