lahore - Instead of getting caught by promoting illegal channels of money transfer and using forged documents to import used cars, the importers of used cars continue to enjoy favor from Govt even with a mini budget announcing duty enhancement on imports. In the recent government initiative to collect duties and taxes, the lobby of used cars has managed to keep import of upto 1000cc used cars away from more taxes cars while locally manufactured lower segment cars’ prices will be increased due to measures announced by Finance Minister IShaq Dar 2 days ago.

With huge investments at stake and taking all sorts of blame, the local car makers seem to be in double jeopardy as if they pass on the impact of the increase in CKD duty to consumers, they will be blamed by the importer mafia and the government itself for increasing the prices, while the import of smaller segment cars will see increase due to exemption from recent duty increase.

An official of a car manufacturing company requesting anonymity said that it is strange that Govt on one hand consider small segment car important for consumers and exempts it from duty increase while on the other it penalises local car manufacturers by imposing 1pc duty on CKD and parts of small segment cars produced locally.

He added that global emerging economies promote local production whereas our Govt has strange logic of inviting investors from around the world and penalise those who have already invested billions of rupees.

As exemptions stated for 1pc custom duty does not cover SRO 655 or SRO 656, therefore, additional duty at 1pc will be applied on imported CKD value and IOR Value, raw materials, Tyres, Steel Sheets, etc, while no change in the Amax rate under SRO-693, as being exempted.

The new rates for CKD duty would be 33.5pc; Sub-component 11pc; IOR-components and other consumables 21pc. Also 1pc duty on raw materials-consumables was imposed, which was earlier 0pc. 1pc increase in duty will also apply on all categories of new imported vehicles (CBU) and locally produced parts as well.

The exemptions from this duty include: imports under SRO-693-(2006); import of goods under RD under SRO-568 (i.e. steel sheets and related products, packed food items); IORs under SRO-565-(2006) available to local manufacturers of 25 sectors; agriculture machinery; raw material of agriculture, pharmaceuticals, textile, etc.; fertilizer, seeds and spores for sowing; plant and machinery for manufacturing of goods falling under 5th Schedule; and telecom sector imports.

‘The industry is already under pressure due to USD value against PKR which is already over 107 and set to reach 108 mark, while this additional tax would increase issues for the industry,’ added an industry official.

He added that the prices of metals used in manufacturing vehicles witnessed much increase in past many years. ‘The price of Aluminum was $1420/ton in April 2009 and now in it is close to $2000/ton. Similarly, the price of Copper was $4405/ton in April 2009 and it is now close to $7000/ton,’ he added.

Similarly, the prices of Lead and Nickel escalated much. ‘The industry is already facing issues with increase in the input cost and this additional duty is adding to their woes. The environment for doing business is become unviable due to such measures of the government,’ he reasoned.

It is worth mentioning that regional comparison shows Pakistan still has lowest prices, and the prices of cars are even lower than India and as far as the quality is concerned, one of OEMs from Pakistan has won best quality award from the parent company.