The government is now reviewing the protection afforded to local car ‘assemblers’ as they have failed to honor their commitment and have been fleecing customers. At the same time, the government has imposed up to 500% more taxes on imported cars in order to protect the local industry from competition.
The plan was announced by the Commerce Additional Secretary during a meeting of the Public Accounts Committee (PAC) that was chaired by MNA Noor Alam Khan and recommended reviewing the undue protection that’s helping local automotive companies in fleecing customers.
The PAC also recommended that the government should withdraw the status of ‘manufacturers’ from the automotive companies and instead call and treat them like ‘assemblers’ – a direction, converted into law, will help to lower protection levels enjoyed by these ‘assemblers’.
According to the PAC, the protection is afforded via the imposition of custom duties, additional custom duties, sales tax, additional sales tax, federal excise duty and income tax at rates that are far higher than charged on the import of parts for locally assembled cars.
The Special Secretary of Commerce, Mujtaba Memon, revealed that local assemblers enjoyed 241% to 500% protection. “Before the recent imposition of additional duties, the protection level was in the range of 100% to 390%,” he added.
The PAC concluded that local car assemblers failed to honor their commitments, over-charged customers by forcing them to pay higher prices than fixed price at the time of booking and delayed deliveries for over a year. Therefore, it directed the Ministry of Industries to make a policy within one month addressing the issued being faced.
PAC Chairman Noor Alam Khan said that even after receiving the full payment in advance, the car makers demand Rs400,000 more from the customers. “Under which law such a demand is made,” he asked.
It also instructed them to charge lower federal excise duty rates comparted to the ones applicable on imported cars. “Any change in the tariff policy at this stage may antagonize the principal manufacturers, but the government will try to frame a comprehensive policy within a month to end the exploitation of consumers.” the Secretary Industries, Imdadullah Bosal, stated.
The PAC also instructed car assemblers deliver vehicles within a month in cases where full payment had been received, while urging them to reduce the overall delivery period to one month and if the vehicle is not provided, the company would pay late delivery charges.
“The company cannot take more than 20% advance and the delivery has to be made within two months. On a delay beyond two months, the company has to pay a fine equal to Karachi Interbank Offered Rate (Kibor) plus 3%. The companies have paid Rs1.9 billion in fines on this account between the period of Nov 2021 to April 2022.” Imdadullah Bosal stated.
If the companies fail to improve their delivery period, the PAC recommended to lower taxes on imported vehicles with engines between 800cc to 1,300cc in order to encourage competition. The PAC also encouraged the government increase the age limit of imported cars from three to five years and directed the FBR to audit the accounts of the car assemblers.
Imports allowed should equal to less than the production capacity of local car assemblers, suggested Pakistan Tehreek-e-Insaf (PTI) Senator, Mohsin Aziz. To which the secretary industries said that, “Against the total production capacity of 506,000 units a year, these companies cumulatively assembled 330,000 units in the previous fiscal year.”
The members of the committee also grilled the car assemblers and the government ministries for collecting advances worth billions for undelivered goods. The committee members said vehicle manufacturers “are allowed 200% profit but the quality of their parts is substandard.
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