Daily Times

Local car importers have expressed disappointment over the Commerce Division of government of Pakistan’s decision to term payment of the duty and taxes on import of new/used vehicles in foreign exchange mandatory.

Recently, in a bid to curb money laundering, outflow of foreign exchange through Hundi/Hawala and misuse of the mechanism of transfer of residence/personal baggage and gift scheme for the purpose of commercial imports of vehicles, Commerce Division of Government of Pakistan has made a major change in Import Policy Order.

Now, it has been mandatory that all vehicle in new/used condition to be imported under transfer of residence, personal baggage or under the gift scheme, the duty and taxes shall be paid out of the foreign exchange arranged by Pakistan nationals themselves or local recipient supported by bank encashment certificate showing conversion of foreign remittance to local currency.

According to the order, the remittance for payment of duties and taxes shall originate from the account of Pakistani national sending the vehicle from abroad and the remittance shall either be received in the account of Pakistani national sending the vehicle from abroad or, in case his account is nonexistent or inoperative, in the account of his Family.

However, used car importers have rejected the government’s decision saying that the order has been issued without taking all stakeholders into confidence and it will have more negative repercussions on national exchequer instead of any increase in revenues for the government.

“Employment of hundreds of thousands of peoples is dependent on the business of import and sales of vehicles. Imposition of the said restriction will almost eradicate the import of vehicles and it will result in huge increase in unemployment in the country” ,said HM Shahzad, Chairman All Pakistan Motor Dealers Association (APMDA).

He said at the outset it is necessary to understand that almost one million vehicles are sold in the market annually. Local assemblers supply about 250000 vehicles and about 70000 imported vehicles. The rest of the public is forced transact 5 to 20 year old cars. Besides, 95% of the used imported cars are of 660 to 100occ.These cars are highly economical and give 25 KM to a liter of fuel; moreover, these are not assembled by any local manufacturer. These cars fulfil the needs of the sender’s family as well as the local market.

Transfer of residence, personal baggage or gift scheme is the only mechanism through which import of new/used vehicles are permissible in Pakistan. In absence of any other means for import of vehicles, by virtue of this SRO, import of vehicles which generates revenue of around USS 1 billion annually for the government in shape of import duties, levies and income tax is likely to be shut down completely; consequently, revenues will also be reduced to zero, he warned.

It is important to mention here, common knowledge that Toyota has increased prices by Rs 600,000 during last two years while Honda prices have increased by Rs 700,000 and Suzuki by Rs 300,000 in the same period. In absence of any alternative for the import of vehicles, the public will be completely at the mercy of the local assemblers who will be at liberty to sell their products at more exorbitant prices in the absence of any competition. Moreover, due to limited production capacity of local assemblers, the on-money or premium over the actual price of a vehicle which is up to Rs 250,000 will also increase manifold.

Shahzad suggested that commercial imports may be allowed so that these people may continue to earn their livelihood. The local assembler is already allowed to import new vehicles so why this is denied to other business enterprises, he questioned.

Published in Daily Times, January 19^th 2019.