ISLAMABAD - Finance Minister Senator Ishaq Dar on Monday directed the Federal Board of Revenue to remove the tax anomalies in taxation system for automobile manufacturers, which have undesired effect of escalation in the prices of the vehicles.
Finance Minister, chairing a meeting with representatives of Pakistan Association of Automotive Parts Accessories Manufacturers (PAAPAM), acknowledged that the imposition of extra tax @ 2pc on sales of auto parts etc. to the automobile manufacturers by auto parts manufacturers constitute a hardship for the automobile industry and may have the undesired effect of escalation in the prices of the vehicles. He further stated that the extra tax @ 2pc was imposed to collect sales tax on the value addition made by the distributors, wholesalers and retailers of auto parts from the auto parts manufacturers as the traders in the downstream supply chain were mostly out of the sales tax net. He agreed with the assertion that the sales made by auto parts manufacturers to automobile manufacturers/ OEMs were not to be treated as retail sales and it was not the intention of FBR to subject these sales to extra tax.
The Finance Minister further directed the officials of the Ministry of Industries and Engineering Development Board (EDB) to hold meeting with the stakeholders of the automobile industry in order to resolve outstanding issues. The Finance Minister further directed officials of Ministry of Commerce to hold meeting with the automobile industry representatives and present a report within one month on issues related to the Ministry. He assured the PAAPAM that the recommendations will be considered in the next financial year 2014-15.
The Finance Minister appreciated the achievements made by the local automobile industry and assured them Government of Pakistan’s full cooperation and support. He said that we need to make Pakistan strong, stable and prosperous country in line with the PML-N manifesto. He said that we are committed to provide a vibrant National Auto Policy. He said that ECC has already formed a sub-committee headed by the Minister for Water and Power as its Chairman to present a report in this regard.
He mentioned that when the Government of PML-N came into power, it was predicted that Pakistan would default soon but with the introduction of prudent policies, today, we are able to increase growth rate, decrease inflation, strengthen our foreign exchange reserves and stabilise the value of rupee. He said that we have given a New Motor Cycle Policy and we will also formulate stand alone policy for automobiles sector. Chairman PAAPAM Usman Malik said that they had an extraordinary session with the Prime Minister during Pakistan Auto Parts Show 2014 in Lahore and are encouraged that the government is very serious in resolving the issues confronting the country. He gave a detailed presentation to the Finance Minister on the current status of Pakistan Automobile Industry and the future potential it has to make Pakistan a developed country in this regard. He informed that currently there are 13 vehicles per 1000 persons in Pakistan, where as in Indonesia and Brazil the number of vehicles per 1000 persons are 79 and 259 respectively.
He said that Pakistan is part of the group of 40 automobile producing countries in the world. He informed that the auto parts being produced are as per global manufacturing standard prescribed by leaders of the industry. He said that the industry provides direct employment to 400,000 workers and indirectly employed 3.2 million people. He said that almost 70 percent parts of automobile produced in Pakistan are being manufactured locally. He informed that last year 1.6 million motorbikes were produced in Pakistan.
In order to strengthen the local industry, the Chairman, suggested clarifying SRO 896(1) meant to recover Additional Sales Tax @ 2pc from items sold in retail markets. He said that the entire industry is of the view that it will lead to increase in vehicle cost. He also requested for rationalisation in taxes and introduction of automobile financing schemes for consumers including in production of economical tractors. He also discussed issues related to formulation of Pakistan Auto Industry Vision 2025. He also took up the issue of imported cars and urged for level playing field for the local industry as compared to automobiles imported from abroad.