KARACHI: The Pakistan Automotive Manufacturers Association (Pama) has urged the government to abolish the customs duty/additional customs duty and reduce the rate of input tax on tractors.

Making a case for duty cuts in its pre-budget proposals, it said the industry is facing a liquidity crunch that is compromising its expansion plans.

The Engineering Development Board (EDB) had earlier allowed the zero-rated import of components not available locally for the manufacturing of agricultural tractors.

In 2015-16, the government imposed an additional customs duty of one per cent on the import of such components. Furthermore, 1pc customs duty was imposed in 2016-17, stated Pama in a press release on Wednesday.

The levy has jacked up the cost of production, it said. Additional duties on input items, like raw material, components, sub-components and completely knocked down units, have hurt the cost-sensitive auto sector, it said.

It said a cut in the government levies will bring down tractor prices within the buying power of small and medium-scale farmers. Agricultural tractors are subject to sales tax at the rate of 5pc against components purchased locally as well as imported to manufacture tractors that are subject to sales tax of 17pc. This has resulted in the accumulation of legitimate refunds with the FBR. “The entire industry is facing a liquidity crunch affecting the trust of foreign investors/shareholders,” said Pama.

Published in Dawn, April 20th, 2017