ISLAMABAD: The government has deferred implementation of a 10 pc reduction in customs duty on the import of cars contrary to the approved Automotive Development Policy (2016-2021) taking the controversial decision at the last moment, officials of Federal Board of Revenue informed the Senate’s Standing Committee on Finance on Saturday. The consumers buying imported cars will thus be required to pay an amount for f t another year. It is pertinent to mention that under the auto policy 2016, a tariff reduction plan on imported vehicles had already been approved for two years – 2017-18 and 2018-19.
The proposal, included in the Finance Bill 2017-18, had incorporated a duty reduction of 10 to 40 pc on new imported cars with engine capacity of 800 to 1,800 cc. As per the proposal, customs duty on 800cc cars was supposed to be reduced from 50pc to 40pc from July 1. Similarly, customs duty on 801cc to 1,000cc cars had to be cut to 45pc from 55pc, on 1,001cc to 1,500cc cars to 50pc from 60pc, and on 1,501cc to 1,800cc cars to 65pc from 75pc of the price of the vehicle.
Saleem Mandviwalla, Chairman Senate Standing Committee on Finance suspected that the government could have taken the decision pressurized by the local car manufacturing lobby. He went on to add that too much protection is being extended to local car manufacturers.
He was also of the view that duties on hybrid cars should be brought down so that local automakers are pressurized into manufacturing such vehicles.
Senator Mohsin Leghari criticised the government for restricting the import of old cars. “We want to support the auto sector of the country, but buyers’ rights have to be honoured, too,” he said.
It was decided that officials of the Ministry of Industries would also be invited in the meeting to discuss the matter.
According to sources, Q Block – the seat of the Ministry of Finance – decided to postpone the implementation of the tariff reduction plan adding that the Q Block had opposed the proposal to implement the automobile policy.
A recent survey by the Overseas Investors Chamber of Commerce and Industry (OICCI) – the representative body of 193 foreign firms working in Pakistan reveals that inconsistent taxation policies are among the main causes for lack of foreign investor confidence when deciding to invest in Pakistan.
The decision to defer the reduction in import duty on imported cars comes at a time when many foreign car manufacturing companies are looking to set up their plants in Pakistan.
It is difficult to ascertain whether the government will decide to defer the implementation of other incentives that are part of the auto policy 2016 such as the single duty rate on localised and non-localised parts after five years of the new auto policy.
