Used imported cars: government considering massive increase in fixed duties

The federal government is considering a massive increase in fixed duties on used imported cars in the federal budget 2016-17 aimed at shielding the local industry, well informed sources in FBR told Business Recorder. The sources said, under SRO 577(I)/2005, duties and taxes rates are fixed in US dollars. The fixed duties are highly suppressed and causing a loss of tax revenue to the government and subsidising imported used cars is also damaging domestic auto industry.
The SRO was revised on November 30, 2015 vide SRO 1175(I)/2015 to the extent of vehicles of capacity above 1000cc only, whereas, the rates are way too low for 800cc and 1000cc cars as compared to higher engine capacity cars. According to sources, the market share of local Suzuki Mehran is 78 per cent with sale of 35,260 units whereas the market share of used imported cars up to 800 cc is 22 per cent with 9860 units.
On average, locally assembled 800cc vehicle consumes locally produced parts valued at approximately Rs 310,000 per vehicle and for vehicles between 801cc-1000cc approximately Rs 375,000 per vehicle. The sources said, the revenue loss below 800 cc cars is Rs 310,000 per unit and if calculated on 9860 imported used cars below 800 cc, total revenue loss has been calculated at Rs 3 billion whereas total revenue loss on imported 10,432 units (801 cc to 1000 cc) has been estimated at about Rs 4 billion per annum.
The sources maintained that proposed duty on used vehicles meant for transport of passengers (upto 800 cc- Asian makes only) is $7,443 against prevalent duty of $3575 per unit. The proposed amount is the weighted average of correct duty calculation for Mira, Alto, Move and WagonR models.
The proposed duty on used vehicles meant for transport of passengers (from 801 cc to 1000 cc) is $9,308 to $5000 per unit. The proposed amount is the weighted average of correct duty calculation for Toyota Vitz and Passo models. Meanwhile, Chairman All Pakistan Motor Dealers Association (APMDA) H.M. Shahzad has dispatched the Association's proposals for federal budget 2016-17.
The Association argues that in 2005-2006 import of used vehicles was permitted after a long gap of 12 years. This was subsequently restricted to import of 3-year-old used vehicles only in different schemes, as a result of which local assemblers have acquired a monopoly on prices and supply, and the freedom of choice of consumers is severely restricted.
APMDA has submitted for budget 2016-2017 to allow commercial imports of used vehicles of up to 5 years of age. Allowing commercial imports, in addition to existing schemes for the import of used vehicles like Transfer of Residence Scheme, Gift Scheme and Baggage Scheme, would be in line with the government's policy of the documentation of the economy and 100 per cent increase in revenue. It would also bring the import of used vehicles business into the tax net and will help the Government expand its tax base. Only certified members of APMDA should be allowed to import the used vehicles on a commercial basis for the sake of transparency of the trade.
According to the Association, the local assemblers are enjoying monopolistic and consumer unfriendly benefits of restrictions on used vehicles import for the last many years. It is important to note that there has been no increase in their production or any reduction in price. They continue to fleece common people in the shape of 100% advance payment at the time of booking of a car and the delivery of a car takes three months to six months! As a result of delays in car delivery, the black marketeer charges a hefty premium "own money" from buyers. They arbitrarily increase the price of their cars as and when they desire, resulting in significantly greater financial burden for the common man and profits for the auto assemblers much higher than in our neighbouring countries.
The promised levels of deletions have also not been achieved, despite the passage of many years. It was pointed out that during the present Government's tenure the exchange rate of Japanese yen depreciated almost 40% but the local assemblers have not given this benefit to the consumers in the shape of price reduction. H.M. Shahzad has claimed that Regulatory Duty (RD) income decline has been a huge revenue loss, which is verifiable from all the Collectorates of Customs.
The problems faced due to issuance of C.G.O.01/09 of January 13, 2009 include depriving the legal, social and ethical right to obtain depreciation @2% per month on old and used vehicles of above 1800cc imported by Overseas Pakistanis. This facility was available for the last 30 years, before it was abruptly withdrawn.
As per current S.R.O. the depreciation on taxes and import value of used vehicle is @ 1% per month. The importers are already paying high tariff rate on account of Regulatory Duty @ 60% on the vehicles of above 1800cc (cars & jeeps) and devaluation of currency. Local assemblers are not assembling cars above 1800cc. The imports of above 1800cc cars and jeeps would not affect the local auto assemblers, as they are charging an unfair profit on their smaller capacity vehicles, he maintained.
The Association has recommended that the government should impose a fixed rate of duty on the import of used vehicles of engine capacity of above 1800 CC as is the policy for used vehicles up to 1800 CC which were already subjected to a fixed rate of import duty. It would help the government check the revenue loss suffered due to arbitrary fixing of import duty and will help to eliminate the variation of taxes in all the ports of country.
APDMA has proposed the government to withdraw advance tax for the registration and transfer of vehicles with immediate effect. This tax is being charged in Punjab and Sindh only. The people are not going for registration and transfer of vehicles and driving on open letter.