The government has suffered a loss of Rs 5.7 billion during first nine months of current fiscal year following restriction on the import of vehicles, older than five years. This revised policy on the imports of old vehicles has resulted in decline in customs duty of Rs 5.7 billion during this period.
The CBR analysis reveals that the auto sector was the top contributor of customs duty; nearly 86 percent of total imports under this head were dutiable, indicating that the extent of exemptions within this group was low.
The duty collection from vehicles, including parts (Chapter 87) of Pakistan Customs Tariff has declined by 19.2 percent mainly due to revised policy for the imports of old vehicles. Consequently, the import of CBU cars/jeeps has been discouraged. A substantial decline of Rs 3.4 billion in the customs duty collection has also resulted. On the other hand, a loss of Rs 2.3 billion has also been incurred in the import of CKD Kits of motor vehicles.
Thus, the combined effect of policy has been a decline in customs duty of Rs 5.7 billion in July-March 2006-2007, the report said. According to the report, the import of motorcars/Jeeps in CBU condition is one of the important sources of collection of customs duty. The policy was revised for import of old and used vehicles in last budget. A restriction was imposed on the import of vehicles, which are older than 5 years. This policy has resulted into reduction in imported motor cars.
During July-March, only 16,782 motorcars/jeeps were imported against 22,583 in the corresponding period of last fiscal, entailing a decline of 25.7 percent. Another interesting transformation has been that around 48 percent of the total imported cars were 1000cc during July-March, 2006-2007 against 31.2 percent in previous fiscal year. Its contribution in duty has increased from 8.2 percent to 14.9 percent. However, the overall collection from CBU motor cars has declined by 42.7 percent mainly due to 55 percent drop in high CC vehicles, as higher capacity imported cars used to fetch higher customs duties and other taxes.
The import of machinery is vital for expansion of industrial sector and overall development of the country. The duty rates of the machinery and raw materials have been slashed significantly during the last few years. The reduction of rates means bringing down cost of business and increasing the pace of business activities.
Major imports of mechanical machinery (Chapter (84) are in the areas of industrial goods (25.3 percent), textile (19.3 percent), construction (12.8 percent), pumps (10.8 percent) and engines (10.2 percent).
The recent data confirms that the import of textile, construction machinery and agriculture implements have dropped by 35.5 percent, 22.8 percent and 47.4 percent respectively. Resultantly, the collection has decreased by 38.2 percent and 31 percent respectively, the report added.