LAHORE - In order to increase sales of locally made cars and increase revenue collection the auto industry has emphasized on need to curb undue concessions to illegally imported used vehicle and to revise the fixed duty set under SRO 577.

The valuation done under the SRO 577 is based on old prices which puts local industry at a disadvantage.

 Regarding Income Tax Ordinance 2001, the industry proposed that the government should reduce Turnover tax from 1% to 0.2% on the turnover of authorized dealers of vehicle manufacturers, as being allowed to motorcycle dealers, distributors of FMCG, pharmaceuticals, fertilizers, oil products under Part-III to Second Schedule to Income Tax Ordinance, 2001.

 Similarly, the government should eliminate withholding tax at 3.5% under section 153 on sale by authorized dealers of vehicle manufacturers, as allowed to distributors of pharmaceutical, cigarettes, textile sector, etc. under Part-II to Second Schedule to Income Tax Ordinance, 2001.

 The benefit of both the proposed reductions is that wholesale-retail mechanism (may be implemented, as applicable internationally) will improve volumes on account of stock availability and healthy competition. Income of dealers will be subject to normal taxation that will enhance documentation and may increase tax to income ratio.

 Auto Industry has also appealed the government to act according to the spirit of the law in case of import of used cars and instead of fixing duties under special but outdated SRO 577 of 2005 should impose duties on current global rates of vehicles. It is pertinent to mention here that duty is being charged at the the rate of $4400 for 800 cc category whereas the current rate of the same category vehicles are approximately $12000.

 Citing an example sources pointed out that CNF Karachi price of new Toyota Vitz is $18,800 and the import duty on new car is 55 percent which along with 17% GST amounts to $15,903 and with 36 percent depreciation on three years old used cars the duty should be $10,178. They said SRO577 in 2005 assessed the tax on new Vitz at $5500 only and its 36 percent depreciated value comes to $3,520.

They said this anomaly is visible in taxes on all vehicles.

 The proposal pointed out that under the used car policy the government of Pakistan has facilitated the expatriate Pakistanis to import used cars up to three years old with up to 36 percent depreciation allowance (one percent per month) on the applicable extremely low fixed duty under SRO 577. Although this concession is being misused because used cars are being imported by commercial traders in bulk and sold in the market;