Government is reportedly considering to enhance tax relief for cars up to 1,000cc in the Finance Bill 2021, with the aim of promoting affordable cars and localization in the country.
A meeting to discuss, review & finalize the new Auto Policy was chaired by Federal Minister for Finance and Revenue Shaukat Tarin on Friday, which was attended by Commerce Adviser Abdul Razak Dawood and SAPM on Finance and Revenue Dr Waqar Masood as well. Federal Minister for Industries and Production Makhdum Khusro Bakhtyar gave a detailed briefing on the new Auto Policy.
The Finance Bill presented in the National Assembly proposed tax measures for vehicles up to 850cc under the Customs Revenue Measures and suggested exemption of Additional Customs Duty (ACD) and Regulatory Duties (RD) and reduction of Customs Duty (CD) from 30% to 15%. For Completely Built Units (CBU), it was proposed to reduce CD from 25% to 10% while for local manufacturing from 12.5% to 5%.
During the briefing, Mr Bakhtyar highlighted that the new auto policy will help provide affordable small cars from 850cc to 1,000cc. Meanwhile, an official of the Ministry of Industries and Production (MoIP) said that there were limited cars below the range of 850cc and enhancing the engine capacity up to 1,000cc would be beneficial for the customers as well as the industry.
“Currently only a limited number of vehicles are below the 850cc category and if the range is enhanced to 1,000cc many auto companies already present in Pakistan would be able to launch small car models in the country.”
Mr Bakhtyar informed the meeting that the upcoming auto policy would help promote localization in domestically-assembled cars, produce exportable surplus of 2- and 3-wheelers auto parts and increase competition. The meeting also discussed various concessions that could be offered for electric vehicles (EV) to increase the number of such car imports. Mr Bakhtyar said:
“Higher number of EVs in the local markets would encourage auto companies to invest in related infrastructure in Pakistan to facilitate EVs,”
The meeting also discussed the non- payment of ACDs by the auto-sector. Federal Board of Revenue (FBR) officials suggested the way forward to the finance minister regarding recovery of pending amount. It was decided that the matter needed to be resolved amicably for final settlement between the FBR and the auto industry.