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Relief for Small Imported Cars Upsets Local Makers

Jawad  08 Jul 2024   168
Relief for Small Imported Cars Upsets Local Makers

Relief for Small Imported Cars Upsets Local Makers

The recent fiscal budget 2024-25 has imposed additional taxes and duties on vehicles, which has upset local car manufacturers. Their primary concern revolves around the tax exemption for small imported cars. The Finance Bill 2024-25 introduced a 15% regulatory duty (RD) on the import of used cars exceeding 1300cc but excluded cars below this engine capacity, much to the annoyance of local car makers.

In a letter to Prime Minister Shahbaz Sharif, the Pakistan Automotive Manufacturers Association (PAMA) expressed their concerns. They highlighted data from January to May 2024, showing that about 62% of imported used cars were below 1300cc. This statistic underscores the significant impact of the exemption on the local auto industry.
PAMA also proposed some recommendations to address these issues. They suggested imposing a 15% regulatory duty on the import of cars with engine capacities below 1300cc while maintaining the current rate on vehicles exceeding this capacity. Additionally, they emphasized the need to update the SRO 577 (I) 2005, last revised in 2015, to reflect current market prices, as the outdated values lead to substantial revenue loss for the government.

Abdul Rehman Aziz, chairman of the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM), also voiced his concerns. He noted that 70% of used car imports consisted of vehicles below 1300cc, exempt from the new regulatory duty. Mr. Aziz highlighted that this influx of used cars negatively impacts local car sales and leads to job losses, with over 50,000 Pakistanis losing their jobs in the fiscal year 2023-24.

Earlier in March, before the Finance Bill 2024-25 was proposed, local vendors and car assemblers had already raised similar concerns. They pointed out that the surge in small car imports was severely affecting the local auto industry. The debate continues on how the regulatory duty on small cars impacts the industry, with local car makers urging for changes to support domestic production.

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