Automark

Lahore Commissioner, Inland Revenue issued a letter stating that Director Excise and Taxation has not issued any statement regarding non-filers can buy 1000 cc vehicle. The letter claimed any such news is fake and not based on a true opinion, neither held any meeting in this regard that FBR has given permission to non-filers to import or buy 1000cc vehicle but not above 1000cc.

(see copy of letter at the bottom of the text)

Tracing the issue:

The government announced in Finance Bill FY2018-19 and proposed that non-filers would not be allowed to buy a new motor vehicle manufactured locally or imported until they file income tax return. After the proposal debate started in the auto industry whether it’s a good step or not. Some argued against it while some lauded the proposal. And now Senate Standing Committee on Finance has recommended to the government that it should relax restrictions on non-filers.

The committee asserted that government should allow non-filers to buy or import cars up to 1000cc to give relief to the middle-class population of the country. As per ET, the committee has conditionally supported the proposal made by the government against non-filers.

On 4th July, a joint meeting with the Commissioner of Income Tax, RTO-II, Lahore agreed to amend the recent law that prevented non-filers from purchasing or importing a new car in Pakistan.

This new statement has been a controversial subject because many think that this can lead to substantial downturns for the economic situation of Pakistan. Nevertheless, it was an effective measure to influence the tax collection of the country, and he urged the citizens to file their taxes.

A bill, signed by the Director of Excise and Taxation has been passed that suggests some changes to the new law. It reads:
[Regarding the previous ruling that prevented filers from buying new cars in Pakistan], a meeting was held with the Commissioner of Income Tax, RTO-II, Lahore who was consented that:-

1. There is no requirement of filers for registration or transfer of motorcycles, commercial vehicles, and cars below 1000 cc [of engine capacity],
2. An applicant for registration of a car above 1000 cc is required to be a filer,
3. A motor car with engine capacity of 1000 cc and above registered by way of transfer (known NRT), the transferee is required to be a filer.

However, there still prevails a confusion whether concerned authorities have allowed non-filers to buy, import and register vehicles or not. We will keep you updated as further information becomes available.

By Iqsa Mirza

The Financial Coordination Committee on 3rd July announced a Rs 90 billion relief package for exporters and automobile importers. The Committee also gave permission to import 50-year-old vintage cars and duty-free import of cars up to 1,600cc. The Federal Board of Revenue (FBR) has said in a notice that we are pleased to grant an exemption of taxes on imports of vintage cars, classic cars and jeeps that are in excess of $5,000 per unit.

The FBR issued SRO 823(1)/2018, which states that classic or vintage automobiles and jeeps have been granted relief from every type of taxes. These automobiles are not going to be charged any of the net taxes:

• Customs obligation
• Further customs obligation
• Regulatory obligation
• Gross sales tax
• Federal excise obligation
• Withholding tax

The SRO states:

“The Federal government is pleased to exempt vintage or classic cars and jeeps meant for transport of persons on the import thereof from so much of the customs-duty, regulatory duty, additional customs duty, federal excise duty, sales tax and withholding tax as are in excess of the cumulative amount of U.S. dollars five thousand per unit.”

It more adds:

“For the purpose of this Notification, vintage or classic cars and jeeps mean old and used automotive vehicles, falling under PCT Code 87.03 of the First Schedule to the Customs Act, 1969 (IV of 1969), manufactured prior to the 1st January 1968.”

The rupee devaluation has taken its toll on Automobile manufacturers in Pakistan as Honda Pakistan has increased the prices of its cars yet again after following the steps of Toyota Corolla. This is the third time in a year that Honda has updated the prices by up to Rs 100,000. Honda’s top seller’s models City and Civic models and the emerging BR-V have also seen the rise in prices. According to informed sources, the reason behind the increase in prices is attributed to Pakistani rupee devaluation against the recent devaluation of the Pakistani rupee against the dollar.

Honda has local assembly plants in Pakistan. However, most of the parts and machinery are still imported. Any devaluation of the rupee results in higher prices of these parts and eventually increase car prices in the local market can be seen. Earlier, Indus Motor Company, the maker of Toyota Corolla and Pak Suzuki have also increased car prices three times since rupee started depreciating against the dollar in December last year.

Prices of Civic’s 1.8 I-VTEC and 1.8L Oriel variants have been increased by Rs100,000. The model now will be priced at Rs2.6 million and Rs 2.75 million, respectively. On the other hand, rates of City’s 1.5L Aspire MT and AT have been increased by Rs50,000, placing them on a new price rate at Rs1.94 million and Rs2.08 million, respectively.

The BRV variants have increased in price by Rs 35,000. Other variants and models have also seen a rate hike by as much as Rs30,000. Not just Toyota and Honda, all major auto manufacturers including FAW also have increased the prices of their vehicles multiple times this as year as the local currency slides in value.

Read Also: Car assemblers in Pakistan have increased car prices following rupee devaluation

Al-Haj FAW has also increased car prices and its fourth time for the current year. The company, in response to the rupee’s depreciating value, has hiked prices for its entire lineup, with other automakers expected to do the same. Their previous price bump happened just about 3 weeks ago. You can check out the price list of FAW models, as well as their details, by visiting their website here.

“The price increase by Honda was expected as PSMC (Suzuki) and IMC (Toyota) have already increased their price for the third time to pass on the impact of the rupee devaluation,” said Farheen Irfan, an analyst at Elixir Securities.

Without a doubt, the rapid increase in prices of domestically manufactured cars is way too high

Indus Motor Company (IMC), known for manufacturing Toyota Corolla has increased the car prices by 50,000 to 25,00000 which is the third price jump by the company since the start of 2018. According to sources, various other local automobile players including Suzuki, FAW, PRINCE DFSK and Chinese brands have also raised the vehicle rates third time since last a few months. The imported vehicles are no more to an exception. The price range graph of imported cars is even higher than locally manufactured vehicles. Pak Suzuki Motors and manufacturers of Honda cars have raised car prices three and two times respectively.

According to the automobile dealers, the companies will increase prices from 1^st July 2018. Heavy Commercial Vehicles (HCV) and Light Commercial Vehicles (LCV) sector, while few companies already increased the precise in last month and few are expected to officially announce the new price lines of vehicles next week.

Read Also: When will we see electric cars running on Pakistan roads?

The companies attributed the higher price rates to rupee devaluation against the dollar.The car assembler said the auto industry has been endeavouring hard to achieve a maximum localization level but locally produced vehicles are based on parts and components which are imported at higher prices from other countries due to weak local which subsequently increase the rates of these vehicles.

Local car manufacturers said policymakers and advisers keep reducing the value of the rupee in a fixed exchange rate to facilitate exporters, mainly of textile sector, but at the cost of the rest of the industry, pointing out automobile sector. The analysts are of the view that the continuous increase in price tags would increase sales of imported used cars more than locally assembled cars.

Without a doubt, the rapid increase in prices of domestically manufactured cars is way too high. Though the high price does account (somewhat) for the heavy customs duties and taxes along with import costs. We hope that government will take necessary steps to keep the car prices in affordable range.

By Aqsa Mirza