LAHORE - Under the new finance bill of the budget 2013-14, the Third Schedule of Sales Tax Act requires that local auto parts manufacturers shall print maximum retail prices and pay sales tax thereon. This tax would not be applicable on the importers, who are neither documented nor pay their full share of taxes.

Industry circles said that this is discrimination against a fully-documented local industry, which will render manufacturers uncompetitive against importers and drive us out of the market.

“The rate of sales tax has been increased by 1% and this has already made our products costlier and shrunk our market share. Besides, shifting of responsibility on manufacturers for collection of retailer’s taxes and working as withholding agents for income tax, sales tax & FED also means incurrence of extra cost, because all these activities required dedicated staff and other resources.”

They said that it is the government’s responsibility to support the local industry and, therefore, the Third Schedule should be made applicable to sale of both local and imported auto parts, or, alternatively, locally manufactured auto parts should immediately be excluded from the Third Schedule of the Sales tax Act 1990.

Seeking reversal of adverse budgetary measures, the Pakistan Association of Auto Parts & Accessories Manufacturers has rejected the inclusion of auto parts, accessories and Tyres in the Third Schedule of the Sales Tax Act, 1990.  PAAPAM Chairman, Munir Bana, regretted government’s decision to make it mandatory for local manufacturers to charge sales tax on retail prices at the time of supply of auto parts.

Vice Chairman, Usman Malik, stated that “We are of the view that auto parts and accessories should not be classified in the Third Schedule because local manufacturers have to compete with imported parts, which are under-invoiced, mis-declared and cleared on weight basis, and thus we have to give discounts and vary prices in different markets.”

Malik added that only 10 per cent of the Rs40 billion market is available to PAAPAM and if Sales Tax is charged on discounts, incentives, transport etc, local manufacturers would lose even this small share of the market, cash flow of the members will be adversely affected and even the government will lose revenues, due to decrease in sale.