Auto industry seeks EV-like incentives for hybrid vehicles

ISLAMABAD: As the government has introduced incentives for electric vehicles through the Electrical Vehicle (EV) Policy, the country’s automotive industry seeks similar facilities for hybrid vehicles as well.

“Incentives for hybrid cars, to be manufactured/assembled in the country, could be introduced through the revised auto policy, which is currently in the process of consultation as the existing policy (2016-21) expires by the mid of this year,” Indus Motors Limited Chief Executive Officer Ali Asghar Jamali said while talking to journalists on Friday.

He said the government should also announce incentives for vendors to encourage manufacturing of spare parts locally. This, according to him, would boost localization of the auto industry.

Shedding light on the global mechanism for sale and purchase of vehicles, Jamali urged the government to adopt a wholesale-retail mechanism for sale of vehicles, as this can help counter ‘on-money’ and delayed delivery of vehicles.

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He said the current system under which new cars are being sold in Pakistan has become unviable for dealers who on a transaction of around Rs4 million (retail price of 1,800cc car) have to pay Rs294,945 as government levy, while their net commission is only Rs56,760.

Elaborating further, he explained, “A dealer acts as a commission agent under the present system. Customers place orders through the dealer and make the required advance payment. The dealer dispatches the payment order to IMC or OEM that generates invoice in customers name and dispatches the car to the dealer that delivers the car to the buyer.”

He said on a car worth Rs399,9000, the customer/dealer pays withholding tax worth Rs75,000. “IMC or OEM pays the dealer commission of Rs64,000, which, after deducting WHT of 12pc, comes to Rs56.760. The dealer has to pay 1.5pc minimum turnover tax also, that is almost 8 times the WHT on commission income.”

Moreover, he added, the WHT applicable on purchase by the dealer and later on sales to the customer at 4pc is too high.

To avoid this double taxation, he proposed that instead of terming dealers as commission agents, they should be treated as retailers while manufacturers as wholesalers. “The minimum turnover tax then should be reduced from 1.5pc to 0.25pc in line with tax applicable to motorcycle distributors, fast moving consumer goods, pharmaceutical and petroleum products. In addition, the government should exempt withholding tax paid by the distributor at the time of purchase of cars from the manufacturers. ”

In reply to a query, the CEO said that the Additional Custom Duty (ACD) on the auto industry should be abolished in the upcoming budget, as the same has already been challenged in the court.

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Ghulam Abbas
The writer is a member of the staff at the Islamabad Bureau. He can be reached at [email protected]

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