Auto industry laments imposition of taxes, says it’s canceling export plan
ISLAMABAD: The automotive industry has informed the government that the imposition of new taxes on locally assembled cars is a waiver of the Automotive Industry Development and Export Plan (AIDEP) 2021-26.
Moreover, the government does not control the import of used cars.
In a letter to the Ministry of Industry and Production, local car dealers and parts manufacturers said that the duties and taxes recently imposed in the mini-budget on the car sector were unfair and could lead to a serious crisis for the automobile assemblers as well as the supplier industry.
The government has increased the Federal Excise Duty (FED) to 5pc from 2.5pc on cars from 1001cc to 2000cc and to 10pc from 5pc on cars over 2000cc.
“The government has failed to curb the import of used vehicles”
Similarly, the government has proposed a tax on imported hybrid cars (851cc to 1,800cc) which will rise from 8.5pc to 12.5pc and the tax on the import of electric vehicles (EVs) under CBU conditions will rise from 5pc at 17pc.
“The automotive sector is a long-term industry and needs stable policies, but the government has deviated from official policies,” Syed Muhammad Ishtiaq, CEO of SM Engineering, told media on Thursday.
He added that the industry has asked the government to stick to AIDEP and refrain from changing it after intervals as it creates a lack of trust between investors and the country.
“But at the same time, the issue of importing used cars was gaining momentum and that too requires immediate attention from the authorities,” Ishtiaq said, adding that last year alone, more than 27 000 vehicles were imported, blatantly abusing gift and baggage programs and depriving the foreign exchange economy.
He said the auto sector had conveyed to the government the demand that, despite high imports, duties on used cars should not be increased.
“Low import duties on used vehicles will encourage exploiters to further dampen the economy and discourage investment in local industry,” he added.
He shared official data showing that over the past 10 years, around 400,000 used vehicles have been imported, capturing a significant share of the market.
He said the growing import of used cars was to some extent responsible for the closure of factories of Hyundai, Nissan, Chevrolet, Fiat and Adam before.
“We are already facing the brunt of rupee devaluation and additional duties, while the misuse of imported used car schemes will be very damaging to the industry,” Mr Ishtiaq said.
Posted in Dawn, February 4, 2022