Proposal for temporary vehicle import, export faces FBR opposition

The Ministry of Commerce’s proposal to permit the temporary import and export of damaged vehicles for repair purposes has encountered resistance from the Federal Board of Revenue (FBR).

The initiative aims to allow businesses with automobile repair facilities to import, refurbish, and then re-export vehicles without involving foreign exchange at the import stage, instead earning foreign revenue through service fees.

The Commerce Ministry, responding to industry calls for policy support, suggested amendments to the Import Policy Order (IPO) 2022 to establish this service-oriented sector.

This proposal, also discussed by the Special Investment Facilitation Council (SIFC), aligns with efforts to bolster exports through schemes like International Toll Manufacturing (ITM), which involves producing goods for re-export using materials supplied by a foreign principal.

Despite support from the State Bank of Pakistan (SBP) and the Ministry of Industries & Production (MoI&P), who recommended effective controls to prevent misuse of the scheme, the FBR voiced concerns.

The FBR argues that vehicle repair does not fit the definition of ITM under the Export Facilitation Scheme (EFS) 2021, citing the practical challenges in issuing authorizations and analysis certificates for vehicles requiring varied parts and accessories replacement.

The Commerce Ministry contends that the current ITM definition is overly restrictive and advocates for its amendment to encompass refurbishment and restoration works, which would not only generate employment and foreign exchange but also diversify the market.

The Ministry has laid out proposals for the Economic Coordination Committee (ECC) of the Cabinet, including amending EFS 2021 rules to accommodate ITM for vehicle repair works, allowing temporary vehicle imports under specific conditions, and prohibiting domestic sales of such vehicles.

The ECC, after deferring an initial decision, has called for detailed consultations with relevant stakeholders, indicating a cautious approach towards resolving the inter-agency dispute and considering the broader implications of the proposed policy changes.