The local auto industry may suffer decline in its sales in case the newly-imposed restriction comes into effect that only filers are allowed to buy locally manufactured motor vehicles. As per estimates of the auto industry, the loss to the industry revenues has been estimated to be of 225 billions of rupees with accompanying loss to government revenues, jobs and plant closures.
It may be noted that the recently announced Federal Budget FY18-19 introduced a new Section 227-C in the Income Tax Ordinance: a restriction on vehicle buying/bookings by non-filers which would effectively reduce the overall automobile market size to the level of 1.2 million from 220 million. Sources in the auto industry said that this condition will severely hit the auto industry as filers make only 40% of the market at the moment and the rest 60% consists of non-filers. With this condition in place, 60 percent buyers will be denied by law to purchase any motor vehicle and will be suddenly out of the market. The market will thus shrink down to just 40% and it would not be a profitable business for the OEMs any more. "Furthermore, currently withholding tax on non-filers at vehicle registration is almost 100% higher in comparison with a filer."
Former chairman Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) Amir Allahwala regretted that the government is not supporting local industry and ignoring consequences of the impact as "60 percent buyers of motor vehicles are non-filers while 40 percent are filers," he added. "Our sales will collapse if 60 percent non-filers fail in lifting our locally made vehicles," he feared. He also highlighted the discriminatory favour to the used car traders as this condition does not apply on used car buyers.
Pakistan Automotive Manufacturers Association (PAMA) Director General Abdul Waheed Khan also seconded the impact and said "if a filer, out of total 1.2 million, buys a vehicle once in five years, the yearly sales are expected to go down to about 240,000 units against the current projected figure of 350,000 units".
"If this condition takes effect, all industry volume projections to 550,000 units under the Auto Policy 2016-21 will be lost," he said and proposed different tax rates for filers and non-filers for the next five years encouraging the filing citizens to pay comparably less tax on their vehicles.
He said although the intention of government is good to bring the non-filers in tax net but the measures should have been evaluated and the change should have been routed gradually and through the auto policy 2016-21 which is already in the field.
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