Used cars' import: new taxation measures put auto industry in jeopardy

04 Dec, 2015

The government has kept the import of up to 1000cc used cars away from new taxation measures, leaving local auto industry in an uncertain business environment; market sources said on Thursday. According to market sources, the government had given immunity to the importers of used cars up to 1000cc in its recent taxation measures while the prices of locally manufactured lower segment cars would be escalated.
They said that local car makers seemed to be in double jeopardy as if they passed on the impact of the increase in CKD duty to consumers, they would be blamed by the importer mafia and the government itself for increasing the prices, while the import of smaller segment cars would see increase due to exemption from recent duty increase.
Meanwhile, an official from one of the car manufacturing companies, on condition of anonymity, said the government on one hand considered small segment car important for consumers and exempted it from duty increase while on the other it penalised local car manufacturers by imposing 1 per cent duty on CKD and parts of small segment cars produced locally.
He further said that global emerging economies promote local production whereas Pakistani government has strange logic of inviting investors from around the world and penalise those who have already invested billions in the country. As exemptions stated for 1 per cent custom duty does not cover SRO 655 or SRO 656, therefore, additional duty at 1 per cent will be applied on imported CKD value and IOR Value, raw materials, Tyres, Steel Sheets, etc, while no change in the Amax rate under SRO-693, as being exempted, he maintained.
The new rates for CKD duty would be 33.5 per cent; Sub-component 11 per cent; IOR-components and other consumables 21 per cent. Also 1 per cent duty on raw materials-consumables was imposed, which was earlier 0 per cent 1 per cent increase in duty will also apply on all categories of new imported vehicles (CBU) and locally produced parts as well.
The exemptions from this duty include: imports under SRO-693-(2006); import of goods under RD under SRO-568 (ie steel sheets and related products, packed food items); IORs under SRO-565-(2006) available to local manufacturers of 25 sectors; agriculture machinery; raw material of agriculture, pharmaceuticals, textile, etc; fertiliser, seeds and spores for sowing; plant and machinery for manufacturing of goods falling under 5th Schedule; and telecom sector imports.
The industry is already under pressure due to USD value against PKR which is already over 107 and set to reach 108 mark while this additional tax would increase issues for the industry, he added. Moreover, he said that the prices of metals used in manufacturing vehicles witnessed much increase in past many years. 'The price of Aluminium was $1420/ton in April 2009 and now in it is close to $2000/ton. Similarly, the price of Copper was $4405/ton in April 2009 and it is now close to $7000/ton,' he added.
Similarly, the prices of Lead and Nickel escalated much. 'The industry is already facing issues with increase in the input cost and this additional duty is adding to their woes. The environment for doing business is become unviable due to such measures of the government,' he said. Regional comparison shows Pakistan still has lowest prices, and the prices of cars are even lower than India and as far as the quality is concerned, one of OEMs from Pakistan has won best quality award from the parent company.

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