KARACHI, June 7: Car makers now fear opening of flood gate of used cars following the issuance of SRO No.557(I)2005 in which maximum duties payable on import of used cars have been revised. Besides, they are also not happy with imposition of six per cent withholding tax on sale of locally assembled cars.

Members of Pakistan Automotive Manufacturers Association (PPMA) were irked by the increase in depreciation of rate of cars below 1,800cc to two per cent from one per cent, fearing that the locally assembled cars would become uncompetitive when cheaper used cars land in Pakistan.

PPMA members would now hold an emergency meeting in a day or two to chalk out future strategy in view of two negative decisions taken by the government.

An executive in a leading car industry said that the duty on 1,301-1,500cc segments has been cut by a big margin of +ACQ-4000. This will considerably reduce the landed price of used car, thus depriving the local manufacturers of a fair and competitive business environment.

Giving an example, he said that a two year old 800cc car imported at Rs115,000 (yen 180,000) will attract a duty of Rs125,000, thus costing Rs240,000 which is considerably less than a locally manufactured car of similar capacity.

Similarly, he said a two-year old 1,000cc car imported at approximately Rs140,000 (yen 250,000) would attract a duty of Rs156,000 thus costing Rs296,000 which was again considerably less than a locally manufactured car of similar capacity.

The cut in duties on used imported cars and increase in depreciation rate is bound to have an adverse impact on the local car industry, he said.

Another executive in a company said that the government is again playing with the duties. The recent budgetary measure would stop the investment by the assemblers and vendors, thus making a negative impact on employment, revenue to the government and transfer of technology.

He said that car makers had always advocated for the long-term policy from the government but the recent decisions had severely hurt the industry.

On the other hand, All Karachi Motor Dealers Association (AKMDA) appeared highly satisfied with the increase in depreciation of used car import, saying that the government had finally accepted its demand.

Chairman AKMDA, HM Shahzad assured the government for raising the import of used cars in Pakistan in this fiscal as compared to last fiscal as import of small engine capacity cars was likely to get boost and consumers would benefit from it due to its affordable prices. Besides, the government would earn handsome revenue from an expected increase in import of used cars.

He said import of small cars would shake up the monopoly of local car makers besides help in eliminating the menace of black marketing of locally assembled cars.

Our Staff Reporter adds from Lahore: Commenting on the budget and the SRO, vendors said the new SRO means that importers of second-hand cars would have a field day and would be at liberty to import only two-year old cars by misusing schemes that are in fact for the benefit of the overseas Pakistanis.

The vendors also criticized the imposition of six per cent withholding tax on the buyers of locally assembled automobiles, increasing the cost for them. They said a 1300cc car would be dearer by Rs50,000-60,000. “This will discourage customers interested in buying locally manufactured car. Now they would prefer buying a second-hand car from auto dealers that would not require him to get into the tax net.”

They felt that the two measures announced by the government would depress the demand for the locally manufactured cars. They said the new measures could force the assemblers revise their plans to invest around Rs52 billion over the next couple of years in the vending industry and their assembly plants because the change in policy had made trading in cars much more attractive than their manufacturing.

Our Reporter from Islamabad adds: The Central Board of Revenue has revised fixed amount of taxes on old and used vehicles through a customs notification issued here on Tuesday by amending the SRO932 of 2004 issued on November 20, 2004.

According to the notification, the amount of taxes fixed in US dollar for payment of depreciated amount in Pakistani rupees was being revised in view of downward revision of rates of customs duties on automotive vehicles/cars.

However, the total amount of taxes on old and used cars of 800cc of makes other than Asian countries has been increased, while vehicles of 1,601 to 1,800cc of non-Asian makes and Jeeps will be assessed as per normal procedure because of a substantial difference in value and consequential taxes on different makes and models.

The depreciation at the rate of one per cent for vehicles up to 1,800cc and two per cent for vehicles above 1,800cc will continue, the notification added.

The proposed accumulative value of customs duty, sales tax, withholding tax and CVT for cars up to 800cc (Asian makes only) will be at 4,000 for cars up to 800cc (other than the Asian makes) at 6,000 cars from 801 to 1,000cc at 5,000 from 1,001 to 1,300cc at 10,000 from 1,301 to 1,500cc at 14,000 from 1,501 to 1,600cc at 17,000 and cars from 1,601 to 1,800cc at 21,000 (Asian makes only, but excluding Jeeps).