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The recent fiscal budget 2024-25 has not only inflicted additional taxes and duties on vehicles but has also irked the local makers, urging them to incur their wrath on the move. The reason behind this episode is not new – same old concerns regarding tax exemption for small imported cars.
In Finance Bill 2024-25, the incumbent government inflicted a 15% regulatory duty (RD) on the import of used cars exceeding 1300cc, omitting the segment below 1300cc engine capacity. Interestingly, this section has annoyed local car makers.
In a letter to Prime Minister of Pakistan Shahbaz Sharif, Pakistan Automotive Manufacturers Association (PAMA) has raised concerns by highlighting the data for the period of January-May 2024, narrating that about 62 of imported of use cars belong to below 1300cc.
The Recommendations
However, PAMA also proposed some recommendations:
- Impose a 15% regulatory duty (RD) on the import of cars with engine capacity below 1300cc while maintaining the current rate of newly imposed RD on vehicles exceeding 1300cc engine capacity.
- The continued use of SRO 577 (I) 2005, last updated in 2015, leads to substantial revenue loss for the government. Taxing based on outdated values is no longer sustainable. A revision to reflect prevailing market prices is necessary.
PAAPAM’s Letter
In addition to PAMA, Abdul Rehman Aziz, chairman of the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM), has also expressed his apprehension, saying that the government would take measures to curb the illegal trade of used car imports. However, the recent budget 2024-25 has disappointed us.
He said 70% of used car imports consisted of vehicles below 1,300cc, which are, unfortunately, exempt from the new regulatory duty. According to Mr. Aziz, Pakistan’s auto industry was bracing for a total sales volume of 135,000 units. However, he expressed concern that 35,000 units, or roughly a quarter, would be imported used cars.
This influx of used vehicles, exempt from the new regulatory duty for smaller engines, is blamed for impacting sales of locally assembled cars and leading to job losses in the sector. Mr. Aziz claims that over 50,000 Pakistanis lost their jobs in the fiscal year 2023-24 due to this trend.
Earlier this March, before the Finance Bill 2024-25 was proposed, local vendors and car assemblers voiced similar concerns, highlighting how the surge in the import of small cars is casting a pall over them.
What do you think about the RD imposed on small cars and concerned voiced by local car makers? Tell us in the comments section.
