LAHORE  - The Pakistan Association of Automotive Parts Accessories Manufacturers, in its budget proposals for 2015-16 sent to the Ministry of Finance, Ministry of Industries, Engineering Development Board and other departments concerned, has asked the government to regulate import of used cars as its misuse is usurping the market share of the auto and auto parts manufacturers, without any contribution to the exchequer, because no taxes are paid on the profits made by the used car dealers. These imports, according to Paapam, are also damaging Pakistan’s economy as they result in drain of valuable foreign exchange.

PAAPAM Chairman Siddique Misri said that duties fixed under SRO 577 are grossly understated and should be updated immediately and, thereafter, revised by FBR every 6 months, to prevent massive tax evasion. FBR should commence a campaign of surveying and registering the used cars dealers, for collection of evaded income taxes and sales taxes, he added.

“The government agencies are duty bound to carry out an investigation of dishonest customs appraisement officers as well as the immigration officers, who are part of this scam of used cars imports in the name of overseas Pakistanis.” He said that the rate of advance tax on imports under section 148 (for manufacturers importing raw materials) should be reduced to 1%, to mitigate cash flow problems of manufacturers.

Siddique Misri said that restriction of exemption amount to 110% of prior quarter should be withdrawn (as growth in business volumes should be welcomed rather than penalized).   Chairman said that through Finance Bill 2014, a plethora of additional income-taxes at source have been added to an already exhaustive list of such taxes. In addition, all companies have been made authorized agents for collecting these taxes at source.  PAAPAM suggested that tax filers should be totally exempted from all tax deductions at source. Authority given to private companies (other than LTU assessees), to act as tax collecting agents, should be withdrawn.

Siddique Misri said that registered industries should be totally exempted from both restrictions, namely: Limiting input tax adjustment to 90% of output tax and Requirement of 20% withholding tax by customers.

He said that the above proposals will ensure assessees’ liquidity, survival and growth (and generation of higher revenues for the exchequer in the future).

Paapam senior vice chairman Mumshad Ali said that regulatory duty was levied on import of CRC/HRC/pipes/tubes vide SRO 18(1)/2015 and SRO 246(1)/2015 dated January 14, 2015 & March 27, 2015 respectively. However, in the above SROs, exemption from regulatory duty was granted on imports of HRC, galvanized steel tubes & metal shells by “local manufacturers” of CRC etc.

He said that PAAPAM now suggests that similar exemption from regulatory duty should also be granted to “local manufacturers” of auto parts, on the following grounds: Except for CRC, raw materials listed in the above two SROs are not manufactured locally. Further, locally manufactured CRC does not comply with “auto grade” standards (which has been verified & certified by Ministry of Industries). Currently, all raw materials which are not manufactured locally, are allowed to be imported by the auto parts industry, under SRO 655, after due verification and issue of IORCs by Engineering Development Board (under the umbrella of Ministry of Industries).

Mumshad said that PAAPAM budget proposals recommended that as in the case of CRC manufacturers, exemption from regulatory duty should also be granted to auto parts manufacturers (APMs), on raw materials not manufactured locally, by addition of following sub-clause (j) in clause 2 of SRO 568(I)/2014 dated 26th June 2014: “(j) imports under SRO 655(1)/2006 dated 22nd June 2006”.