Carmakers delaying price relief despite duty, tax cut

Published July 7, 2021
The taxation measures had been aimed at providing some relief to the customers from July 1, but so far the prices have been intact to their previous levels. — Reuters/File
The taxation measures had been aimed at providing some relief to the customers from July 1, but so far the prices have been intact to their previous levels. — Reuters/File

KARACHI: Auto assemblers have been dragging their feet in passing on the price cut benefit to the consumers after the government’s decision of slashing federal excise duty (FED), general sales tax (GST) and additional customs duty (ACD) on import of parts and accessories from July 1.

Six days have gone and the assemblers and even their dealers are not ready to give a clear picture as to why the prices of vehicles have not come down after issuance of Finance Bill 2021 making budgetary measures effective from July 1.

The government had cut FED on all vehicles up to 3,000cc by 2.5pc while on vehicles from 660cc to 1,000cc the FED had been abolished. The GST had been cut to 12.5pc from 17pc for cars up to 1,000cc.

For 1,001cc to 2,000cc vehicles, the FED was decreased to 2.5pc from 5pc and for 2,001cc to 5pc from 7.5pc.

The government has also cut ACDs on all vehicles from 7 to 2pc and its notification has been issued on June 30, 2021.

The taxation measures had been aimed at providing some relief to the customers from July 1, but so far the prices have been intact to their previous levels.

Almost all the assemblers have ganged up to delay the price benefit to the consumers linking it to non-release of any SRO or notification on FED and GST after release of Finance Bill 2021.

However, these assemblers in their past practice had been quick in jacking up prices in case of any increase in duties and taxes.

A Japanese car assembler, who asked not to be named, said prices had not been cut yet as the company is waiting for the government confirmation as no SRO has been released yet.

He said the SRO would be issued in a day or two. “The cabinet approved it on Tuesday and tomorrow is a press conference and we expect the SRO by Thursday,” he added.

The assembler said reduction in ACD needs an SRO while FED cut has been made via Finance Bill. Car dealers of the local assemblers are also silent saying that they have been waiting for the price reduction’s letter or notice from the assemblers.

A Japanese car dealer said delivery of vehicles for July period to the customers had been put on hold in absence of any price guideline from the assembler. Delivery of vehicles in July means that the customers had paid full payment which he had booked the vehicle one to four months back depending on the vehicles.

He said new bookings of vehicles are being made at old prices and the company would refund the balance amount to the customers at the time of invoice delivery of vehicles.

Sources said only one Korean vehicle assembler — Lucky Motor Corporation — has asked its dealers to take booking of new vehicles at reduced prices after cut in various taxes and duties.

Sources said that old auto players are dilly-dallying in passing on the full impact of GST and FED cut to the consumers as they feel that they may need to adjust prices keeping in view high shipping and freight charges and rupee devaluation against the dollar in the last one a half months back.

Published in Dawn, July 7th, 2021

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