The Federal government in its struggle to look after revival of industries in Pakistan post lock down, has proposed relief steps for industries including automotive sector. Several steps are proposed in budget 2020-2021 to support the automotive industry from damages that are done in past months.
The month of April brought an unprecedent damage for automotive industry as the industry was able to sell only 29 units during the whole month and that too trucks and buses. No single car was sold in the month of April 2020 as masses struggle with economic uncertainty or loss in hand of the coronavirus pandemic.
Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) earlier this month requested the State Bank of Pakistan (SBP) to help auto industry in surviving this difficult period through loan facilitations, imports duties and tax reliefs.
Salient Features of Proposed Relief to Auto Industry
- Import duties will be 10% applicable from December 2020 on Cars Complete Knocked Down (CKD) units. In case of localized CKD, there will be no change in duty.
- The Federal Excise Duty (FED) for locally manufactured cars, that was 10% under Finance Supplementary Second Amendment Act 2019, will be removed altogether.
- Minimum tax u/s 113 will be reduced from 1.5% to 0.25% for automobile manufacturers, vendors and dealers.
- The Federal government plans on completely eliminating 3% additional sales tax that was implemented last year under Schedule of the Sales Tax Act, 1990.
- Increase in additional customs duty for imports under SRO 655 and SRO 656 is also to be withdrawn.
- Federal government will also propose an additional waiver on minimum turnover tax for Greenfield projects.
- Sales Tax will be reduced on imports for automotive industry.
Demands by Auto Industry
In addition, PAAPAM has further placed many demands with the State Bank of Pakistan that will be under consideration by Federal government in coming budget. These include waiver of 100% cash margin on letter of credit, 15% export rebate on auto exports and import without letter of credit to be increased to $25000.
Update: Despite high expectations of relief from the government, the federal budget has remained neutral for auto industry with higher FEDs for luxury 4 by 4 double cabins. There is no change in sales tax and import duties as of now in auto imports. However, details for waiver in custom duties on raw materials for different industries and rationalization of tariffs on 90 tariff lines are yet to come.