ISLAMABAD: The Auto Industry Development Company (AIDC) which is scheduled to meet on April 23, 2020 will finalise recommendations for budget 2020-21 on the proposals of PAMA and PAAPAM.
PAMA, in its proposals has suggested new HS codes for SUVs saying that proposed 1-correct HS code description of 8703.2323/3223 by removing 4x4 condition and also create two new HS headings at eight-digit level to provide for these new locally manufactured SUVs only.
Local assemblers have also demanded that all ACDs must be withdrawn as such levies have been counterproductive for revenue generation and blameful for industry losing its volume by more than 50%. An exclusion clause to be added in SRO 670(I)/2019 through which all imports under SRO 655 and SRO 656 to be exempted.
PAMA has sought withdrawal of SRO 644(I)/2018, saying that this is clearly in utter disregard to the Auto-Policy 2016-21 wherein the prescribed rate is 50% only to be changed when policy review is due in the year of 2021. PAMA has urged the government to immediately retract this duty concession on CBU import of EV.
PAMA has further stated that age limit of used imported cars are restricted up to 3 years whereas SUV/LCVs are allowed up to 5 years. However, 15 new entrants have come into the market under AIDC 16-21. These new players will be introducing many new vehicles of their respective brands. Therefore, PAMA has proposed to restrict age limit of luxury SUVs and LCVs to 3 years similar to that of cars by amending IPO/SRO 345 (I) 2016.
The association is also of the view that the issuance of SRO 577 (I)/2005 is causing substantial loss in revenue and although so pointed out, yet no action has been taken so far. The SRO, if it is not abolished completely, may be updated to bring the fixed amount of duty and taxes at par with the reality of the time. It is tantamount to “deliberate” loss of revenue as the SRO stayed unrevised for the last six years. PAMA has proposed the SRO may be revised and updated.
The government has allowed exemption from Minimum Tax under section 113 to various categories of taxpayers under Clause 11A of Part IV, Second Schedule of Income
Tax Ordinance while several industries are enjoying reduced rates of turnover tax. Auto sector should also be subject to lower minimum tax being the most organized sector. And it should be allowed to be carried forward without limitation.
PAMA said minimum tax is breach of principle of income tax which is to be levied on profit only. As such, it proposed that the minimum tax may be withdrawn completely. Initially, the rate of tax was 1% which was gradually increased to 5.5%. With this high rate billions of rupees of the industry remain locked up with the government unfairly. This obviously causes cash flow problems which have currently become even more cumbersome with higher markup rates.
The sources said that import of used cars through misuse of import policy was discussed in 31st AIDC meeting. The participants, proposed enhancement of fixed import duties under SRO 577 in view of rise in number of imported vehicles in January & February 2020.
The FBR was requested by the AIDC to provide import figures to ascertain the increase in imports. According to the data provided by FBR, the import figures have increased significantly in January-February 2020 as compared to average number of used vehicles imported during July–Dec 2019. However, the import of used cars in March has reduced as per verbal confirmation by FBR. The decrease in imports during March and April may also be due to the emergency situation abroad and decreasing interest of the customers due to lock down.
The matter will be placed before the AIDC for appropriate recommendation in the light of number of vehicles imported during the specified time.
The used cars/vehicles which were 27,987 during July-December 2018 massively declined to 3,797 during July-December 2019. However, the import reached 6,854 during July-February 2019-20.
As per decision taken in the 31st AIDC i.e. EDB will endorse the proposal of import of vintage cars with a recommendation to ensure proper utilization of the scheme. As per AIDC’s decision, EDB has submitted the endorsement of AIDC to Ministry of Commerce letter.
The draft EV policy has been submitted by EDB to MoIP for consideration. A meeting of senior level committee constituted by ECC of the cabinet was held on April 6, 2020 under the chairmanship of the then Advisor to Prime Minister on Industries. The discussions on EV Policy proposals to the extent of 2-3 wheelers will be held soon.
However, in EDB’s view, the recommendations regarding EV specific parts may be forwarded to National Tariff Commission (NTC) for consideration and incorporation in Budget for 2021-22 to the extent of 2-3 wheelers. EDB circulated the lists to the relevant industry for their inputs. The EV specific parts/components for 2-3 wheelers to be recommended for 1 percent custom duty for recommendation/endorsement of AIDC prior to onward submission.
The discussion regarding adoption of WP-29 regulations will be held in technical committee as per decision taken in 31st AIDC i.e. EDB may continue adoption of WP 29 regulations and detailed discussion at the technical committee may be carried out shortly involving PSQCA and local manufacturers of cars and parts.
In an AIDC meeting it was unanimously decided that Federal Excise Duty and Additional Custom Duty may be recommended for removal in order to boost sales. In this regard, EDB/MoIP will take up matter with FBR based on consolidated data acquired from FBR. Accordingly EDB requested FBR to provide the relevant data in this regard. Since the data is still awaited, the matter is placed before AIDC for recommendation.
As per ADP 2016-21, the manufacturing companies have signed contract agreements with MoIP wherein the local manufacturing of CBUs imported under concessionary regime has to start within two years of import. Similarly, the plant has to start its operations within two years of import of first CBU. A number of new entrants are apprehensive to miss the timelines slightly due to prevailing situation and the commitments can be reviewed at the end of lock-down/ start of manufacturing operations. The matter is being brought to the notice of AIDC in advance.
The policy will end in June 30, 2020, which includes cars, LCVs, HCVs, trucks and buses etc. During the policy formulation on EVs, EDB has taken the stance the proposals should be synchronized with ADP 2016-21, continuity of ADP 2016-21 to be ensured and no change in ADP till its expiry period i.e. June 30, 2021 should be made.
In 29th AIDC meeting limiting import of buses in CBU condition under ADP 2016-21 was discussed on request of PAMA and M/s Master Motors. It was opposed by various new entrants and highlighted that legal position needs to be considered prior to any recommendation. Recently, Al-Haj Bus Company has been approved as new entrant.
Furthermore, M/s Khalid & Khalid, new entrant under ADP also intends to manufacture buses. EDB has also received an application by M/s Universal Motors for manufacturing of Make “Higher”. Few other new entrant companies including JW Foton Auto Park, M/s Dysin Automotive have submitted request for change in business plans to introduce HCVs in local market. EDB has recommended that AIDC should approve in principle that a change in Automotive Development Policy (ADP 2016-21) is advisable at this stage or not.—MUSHTAQ GHUMMAN
