The government has been proposed to unveil a long-term tariff policy for motorcycle industry in the budget 2007-08 with pre-announced phase-wise reduction in duty on completely built units (CBU) and completely knockdown units (CKD) besides import of localised parts, sources told Business Recorder on Thursday.
Sources said that Engineering Development Board (EDB) has put up the proposal for adopting a long-term policy and forwarded it to the Ministry of Industries for onward submission to the government for making it a part of the upcoming budget after working out needed reduction in import of motorcycle both in CBU and CKD forms.
Drawing a comparison of motorcycle production and import duty in Pakistan and India, the EDB asserted that India has huge production, over seven million motorcycle yearly, whereas Pakistan has been producing only 0.750 million. The import duty on CBU motorcycle in India is 60 percent and excise duty 24 percent making total impact of 91 percent before levy of sale tax whereas Pakistan imposes 90 percent customs duty on motorcycle before levy of tax.
The EDB suggested that 5 percent cut in duty on CBU every year, recommending to be reduced to 85 percent in 2007-08 and then to 80 percent in 2008-09 and 75 percent in 2009-10. For the next two years, 2010-11 and 2011-12, the duty should be kept at 70 percent.
The EDB, sole body for the development of engineering sector in Pakistan, recommended reduction in customs duty on import of CKD to 10 percent, down by 15 percent from current level of 25 percent. The proposed duty reduction is 25 percent in 2007-08 to be followed by 20 percent in 2008-09 and then to 15 percent in 2009-10 and subsequently to 10 percent in 2010-11.
The level of 10 percent will be maintained for the next two years, 2010-11 to 2011-12. The EDB has also proposed that the customs duty on import of localised parts may also be reduced to 30 percent at the rate of 5 percent every year.
It also proposed entry No 11 in the SRO 656 (1) 2006 to accommodate raw materials for manufacturing vehicles, saying that raw material consumed directly by the manufacturers of vehicles was not mentioned in the Tariff Based System (TBS).