Category: Automotive

PkRevenue provides stories related to automotive industry. We focus on auto policy of Pakistan. The coverage also includes sales of domestic manufacturing.

Withholding tax up to Rs200,000 imposed on sale of new car within 90 days

ISLAMABAD: The Federal Board of Revenue (FBR) has imposed up to Rs200,000 as withholding tax on sale of motor cars within 90 days of first registration, sources said on Monday.

The withholding tax has been imposed till June 30, 2021. The revenue generation measure has been taken in order to discourage the trend of ‘on money’.

Following withholding income tax rates have been imposed on motor vehicles:

01. Tax rate at Rs50,000 has been imposed on sale of up to 1000CC motor vehicles.

02. Tax rate at Rs100,000 has been imposed on sale of motor vehicles between 1000CC and 2000CC.

03. Tax rate up to Rs200,000 has been imposed on motor vehicles with engine capacity of 2000CC and above.

In order to apply the rates an amendment to Section 231B of Income Tax Ordinance, 2001 has been made.

Following is the text of the amendment:

“Every motor vehicle registration authority of Excise and Taxation Department shall collect advance tax from the buyers of locally manufactured motor vehicles who subsequently sell it within ninety days of delivery of such vehicle whether prior to or after registration.”

The FBR said that no collection of the withholding tax under the new amendment would be made after June 30, 2021.

February 15, 2021
Car sales climb up by 23 percent in seven months

KARACHI: The sales of locally manufactured motor cars registered 23 percent increase during first seven months (July – January) of 2020/2021 owing to lower interest rates and reduction in coronavirus infection rate.

According to Pakistan Automobile Manufacturers Association (PAMA) the car sales increased to 97,469 units during first seven months of the current fiscal year as compared with 79,458 units in the corresponding months of the last fiscal year.

The total number of car sales also included 2,279 units sold by Hyundai, which started reporting of sales from the current fiscal year.

Indus Motors has registered 74 percent growth to 31,591 units during the period under review as compared with 18,197 units in the corresponding period of the last fiscal year.

The sale of Honda Cars also posted 56 percent growth to 16,116 units during July – January 2020/2021 as compared with 10,356 units in the same period of the last fiscal year.

However, the sales of Pak Suzuki witnessed a decline of 7 percent to 46,949 units during the period under review as compared with 50,253 units.

Analysts at Topline Securities said that car sales, as reported by PAMA, have increased by 46 percent YoY in January 2021 to 17,515 units.

The same, including Lucky Motor Corporation (KIA, non-member of PAMA), is up by 67 percent YoY.

Pak Suzuki (PSMC) led the charge of the New Year euphoria with a massive increase of 62 percent YoY. This was primarily driven by Alto (+113 percent YoY) and Wagon R (+132 percent YoY) sales.

Indus Motor (INDU) and Honda Car (HCAR) registered sales increases of 36 percent YoY and 11 percent YoY, respectively. INDU sales were led by Yaris, which again outsold total HCAR sales.

New entrants into Pak Auto space, Hyundai Nishat sold 515 units in Jan-2021, while Lucky Motor sold around 2,500 units, as per our channel checks.

Car sales have increased by 26 percent MoM in January 2021. The increase was driven by HCAR (+39 percent MoM) and INDU (+36 percent MoM) as the New Year effect kicked in.

Atlas Honda (ATLH) recorded motorbike sales of 114,001 units in Jan-2021, up 20 percent YoY. In 7MFY21, sales have increased by 20 percent YoY.

Tractor sales in Jan-2021 are up by 135 percent YoY and 57 percent MoM. Millat Tractors (MTL) recorded increase of 195 percent YoY (+30 percent MoM) while Al Ghazi Tractors (AGTL) sales increased by 53 percent YoY (+290 percent MoM), respectively.

The analysts said that demand for cars to grow stronger owing to low interest rates environment and pickup in economic activity.

February 11, 2021
Withholding tax imposed on motor vehicle sale to discourage ‘on money’

ISLAMABAD: The federal government has approved an additional withholding tax on motor vehicles sold within 90 days of delivery in order to discourage ‘on money’ trend, sources said on Wednesday.

The federal cabinet in its meeting on February 09, 2020 approved the Tax (Amendment) Ordinance, 2021 to implement through a presidential ordinance.

The sources said that through the Tax (Amendment) Ordinance, 2021 withholding tax on vehicles had been imposed in case the motor vehicle was sold within 90 days of delivery.

The tax has been imposed in order to discourage investors and ‘on money’ trend.

The levy has already been approved by the economic coordination of the cabinet.

The sources said that the withholding tax will be applicable after promulgation of the ordinance.

February 11, 2021
Motor vehicle tax collection grows by 15pc to Rs12.7 billion in 1HFY21

ISLAMABAD: The collection of motor vehicle tax has increased by 15 percent to Rs12.7 billion during the first half (July – December) of 2020/2021 owing to improved business and commercial activities after ease in coronavirus lockdown.

According to official statistics made available on Saturday, the motor vehicle tax collected by all the provinces increased to Rs12.7 billion during the first half of the current fiscal year as compared with Rs11 billion in the corresponding half of the last fiscal year.

Province wise collection data revealed that Punjab had contributed the major chunk under this head. The Punjab province collected Rs7.08 billion as motor vehicle tax during first half of the current fiscal year as compared with Rs6.52 billion in the corresponding half of the last fiscal year.

In terms of growth, the Sindh province registered an increase of 28.48 percent to Rs4.28 billion during the period of July – December of the current fiscal year as compared with Rs3.33 billion during the same period of the last fiscal year.

The collection of motor vehicle tax by the province of Khyber Pakhtunkhwa registered an increase of 2.24 percent to Rs865 million during the first half of the current fiscal year as compared with Rs846 million in the corresponding half of the last fiscal year.

The Balochistan province collected Rs413 million as motor vehicle tax during July – December 2020/2021 as compared with Rs303 million in the same period of the last fiscal year.

February 6, 2021
Import of CKD motor vehicles witnesses unprecedented growth

ISLAMABAD: The import of motor vehicles in Completely Knock Down (CKD) condition has witnessed a unprecedented growth of 4902 percent in December 2020 due to acceleration of manufacturing activities by auto industry in the country.

According to Pakistan Bureau of Statistics (PBS), the import of motor vehicles in CKD/Semi Knock Down (SKD) condition increased to $107 million in December 2020 as compared with meagre $2.14 in the same month of the last year.

The country’s car industry witnessed significant downfall during the last year due economic slowdown and adverse impact of coronavirus.

The economy during the first half of the last year had witnessed consolidation and shown improvement in early 2020. However, the coronavirus which detected in last months of 2019 in China adversely affected the world as well as domestic economy.

The car manufacturing in the country has witnessed growth during the first half of the current fiscal year. However, the pace of manufacturing grew at a faster pace in the last months of the first half of the current fiscal year.

The car production is major component of Large Scale Manufacturing (LSM) as this industry grew by 1.97 percent in November 2020 over the corresponding month of the last year.

Meanwhile, car sales, as reported by PAMA, increased by 15 percent YoY in December 2020 to 13,870 units.

The same, including Lucky Motor Corporation (KIA, non-member of PAMA), is up by 20 percent YoY.

January 17, 2021
Car sales increase by 18 percent during first half

KARACHI: The sales of domestically manufactured cars have registered 18 percent growth to 78,910 units during first half (July – December) 2021/2021 as compared with 67,019 points in the half of the last fiscal year.

The increase in cars sales during the first half mainly attributed to addition of 1,169 units manufactured by new entrant Hyundai, according to data released by Pakistan Automotive Manufacturers Association (PAMA) on Monday.

The sales of Pakistan Suzuki fell by 15 percent to 37,936 units during the first half of the current fiscal year as compared with 44,698 units in the same period of the last fiscal year.

However, sales of Indus Motors posted strong 84 percent growth to 26,139 units during the first half of the current fiscal year as compared with 14,175 units in the corresponding half of the last fiscal year.

The sale of Honda Cars also registered increase 68 percent to 13,666 units during July – December 2020 as compared with 8,146 units in the same period of the last fiscal year.

Car sales, as reported by PAMA, increased by 15 percent YoY in December 2020 to 13,870 units. The same, including Lucky Motor Corporation (KIA, non-member of PAMA), is up by 20 percent YoY.

Indus Motor (INDU) and Honda Car (HCAR) registered sales increases of 72 percent YoY and 76 percent YoY, respectively. Pak Suzuki’s (PSMC) sales declined by 13 percent YoY.

New entrants into Pak Auto space Hyundai Nishat sold 511 units (+8 percent MoM) in Dec-2020, while Lucky Motor sold around 600 units, as per our channel checks.

January 11, 2021
Association hails decision to probe high car prices

KARACHI: Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM) has welcomed the decision of the government for probing higher automobile prices in the country.

The high prices are mainly due to lower content of localized parts and government’s strict tariff and taxation policy.

In a meeting held on Saturday, the senior PAAPAM members endorsed the Federal Cabinet direction to launch inquiry in this regard, saying the rates of vehicles can be reduced through full implementation of localization regime.

The imposition of regulatory duty, additional customs duty, devaluation of rupee and higher federal excise duty are major burden on the consumers of cars, they added.

“As the existing Auto Policy is to expire by the midyear, right away triggering preparations for AIDP 2021-26, it is right time to give a complete shake up to the stagnant system regulating the Automotive regime, to bring transparency and credibility to the procedures,” they demanded.

The participants of the meeting observed that Prime Minister Imran Khan has rightly pinpointed the issue, because the country is being exploited as a consumer country instead of manufacturing country. We need to “Make in Pakistan” not “Assemble in Pakistan”, they stressed.

PAAPAM fears that in absence of a transparent import regulatory system for automotive parts economic situation will have a further dip with New Entrants, coming into field and launch of Electric Vehicles (EVs) being on the doorstep.

The participants of the meeting said that the entire industry is dependent upon unregulated imports resulting in higher car prices.

They lamented that in spite of having exclusive Pakistan’s domestic market for over three decades the country has failed to achieve anticipated localization targets, leading enormous foreign exchange outflows in exchange of costly parts’ import, having no check at all.

“It’s the time to deeply analyze the root cause of high prices of cars in the country and devise a long-term strategy to timely produce the vehicles in line with demand, besides devising and implementing 10-year ‘Auto parts localization policy’ (APLP) to ensure the localization of all value-added parts.”

They said that it would result in cost reduction, reduction in lead time parts availability to assemblers and vehicle availability to consumers.

Moreover, these measures will create technology awareness, generating skilled jobs for local youth, reducing revenue loss to the government exchequers, besides forcing the OEMs to invest in inspection & testing labs to reduce lead time for approval of locally developed auto parts.

They said that the trio-government regulators in the automotive Sector namely EDB (Engineering Development Board)/MOI&P, MOC and FBR have yet to devise a transparent and coherent system for regulating imports of CKD Kits for lot many variants of vehicles locally assembled.

They said that the EDB, with its meager resources may not singularly handle the gigantic task of classifying Automotive Parts import, directly affecting vehicle prices, promoting the local industry and watching financial interests for national exchequer.

January 2, 2021
Proposed new tax on car purchase resented

KARACHI: An association of industries and traders has resented proposed plan of the government to impose a new tax on purchase of motor vehicles.

Pakistan Industrial and Traders Association Front (PIAF) has voiced its serious concern over the imposition of new tax on the sale of new cars to control ‘On Money’ practice, saying the move will further enhance the prices of already world most expansive Pakistani four wheelers, said a statement.

PIAF chairman Mian Nauman Kabir said that the government has decided to impose up to Rs200,000 additional withholding tax on the purchase of new cars on the plea of discouraging ‘On Money’ but actually the move has been aimed at achieving FBR’s target of tax collection.

He said that the locally-assembled cars are very expansive mainly due to exorbitant government taxes and high profit margins of the assemblers despite the fact that their quality is very low.

The additional withholding tax of up to Rs200,000 will put more burden on the consumers, who are already buying the very costly vehicles as compared to rest of world.

He said that the consumers were upset due to unnecessarily long delivery time for vehicles by the manufacturers. In order to discourage the practice of “on money” the government, instead of taking some solid measures, has imposed additional Withholding Income Tax, which does not seem to be logical.

He said that government can control prices by checking various costs and then ensuring 20 or 30 percent profit of the company.

“Right now car manufacturers have 1-year advances, which is more than their total investment,” he said.

“Secondly, the government can definitely intervene to ensure quality, as a car carries a human being and human life is dependent on its quality. The companies in India, Canada or USA have different features and different safety modes and features. Same models in Pakistan have almost zero safety features whereas price in Pakistan is much higher. Let’s forget price for sometimes but at least give us a safe vehicle with less oil consumption,” he argued.

He said that nowadays 25 percent of the price is being charged in the name of on money. Even if you pay 100 percent you cannot get a car and have to pay ‘ON’ in lakhs, which is almost 25 percent of the total price that is right under the government nose and in knowledge of the concerned authorities, he added.

PIAF leader appealed the government to devise some mechanism to regulate the automotive sector in view of the quality as well as the prices in consultation with all stakeholders including the industry as well as the consumers.

Mian Nauman Kabir said that local manufactures revise their cars prices whenever they desire and that too without getting due approval from any authority, which affect the common people badly.

The Engineering Development Board (EDB) will have to devise some rules and regulations to benefit the consumers along with securing the interest of the auto assemblers in the upcoming auto policy, he said. PIAF also suggests the Senate Standing Committee on Industries and Production to take the notice of exorbitant and ever-soaring prices of cars in Pakistan along with illegal practice of charging ‘on money’ or premium, he added.

The Senate Standing Committee on Industries and Production, the Engineering Development Board, FBR, Pakistan Automotive Manufacturers Association and major Consumers Welfare Associations should sit together and finalize some mechanism to bring down the prices of automobiles in line with the rates of international market, by revising profit margins and decreasing taxes and duties in the larger interest of the public.

December 25, 2020

FBR updates rates of duty, tax on import of vehicles

ISLAMABAD: Federal Board of Revenue (FBR) has issued updated rates of duty and tax for customs clearance of imported vehicle.

The Federal Government of Pakistan has extended various benefits / exemptions to the taxpayers for importing vehicles, according to updated rates up to June 30, 2020.

The details concessions / exemptions are given as under:-

i. S.R.O. 577(I)/2005 Dated 06.06.2005 (Exemption from customs duty, sales tax, withholding tax on import of certain specified Old and used automotive vehicles)

The import of old and used automotive vehicles of Asian makes meant for transport of persons, specified in column (2) of the Table below, falling under PCT heading No. 87.03 of the First Schedule to the Customs Act, 1969 (IV of 1969), is exempted from so much of the customs-duty, sales tax and withholding tax as are in excess of the cumulative amount specified in column (3) thereof,

Sr. No	Automotive vehicles of Asian makes meant for transport of persons.	Duty and taxes in US$ or equivalent amount in Pak rupees.
(1)	(2)	(3)
1	Up to 800cc	US$4800
2	Up to 801-1000cc	US$6000
3	From 1001 – 1300cc	US$13200
4	From 1301 – 1500cc	US$18590
5	From 1501 – 1600cc	US$22550
6	From 1601 – 1800cc (Excluding Jeeps)	US$27940

It is relevant to mention that the Federal Government has fixed the leviable duty and taxes of automotive vehicles of Asian makes meant for transport of persons as discussed above irrespective of their physical condition. The Customs officers do not have any discretionary power to increase / decrease the leviable duties / taxes, the FBR said.

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December 19, 2020

Car import surges by 194 percent in five months

ISLAMABAD: The Import of motor cars in Completely Built Unit (CBU) has surged by 194 percent during the first five months (July – November) of the current fiscal year owing to ease in travel restrictions that were imposed due to the coronavirus pandemic.

According to the Pakistan Bureau of Statistics (PBS), the import of cars increased to $77 million during the first five months of the current fiscal year as compared with $26.13 million in the same period of the last fiscal year.

As per import policy of Pakistan every person can bring a new motor car by paying prevailing rate of duty and taxes. However, the commercial import of motor cars is not allowed.

The import of used cars are allowed under various schemes to facilitate Pakistanis living abroad. The overseas Pakistanis can bring motor cars under personal baggage, transfer of resident or gift schemes.

New vehicles can be imported into Pakistan freely by any one against payment of duty & taxes under generally applicable import procedures and requirements.

Officials in Pakistan Customs said that Pakistani nationals residing abroad including dual nationals can import old and used vehicles into Pakistan under the following 03 schemes: Personal Baggage; Gift Scheme; Transfer of Residence.

Cars not older than 03 years and other vehicles not older than 05 years can be imported under these schemes.

The structure of duty and taxes under these 03 schemes remains the same. Motorcycles and Scooters can only be imported under Transfer of Residence Scheme.

Students receiving remittance from Pakistan, non-earning members of the Pakistani nationals living abroad and those who have imported, gifted or received a vehicle in the past two years are not eligible.

The customs authorities said that all vehicles in new/used condition to be imported under transfer of residence, personal baggage or under gift scheme, the duty and taxes shall be paid out of foreign exchange arranged by Pakistan nationals themselves or local recipient supported by bank enchashment certificate showing conversion of foreign remittance to local currency, as under:

a. the remittance for payment of duty and taxes shall originate from the account of Pakistani national sending the vehicle from abroad; and

b. the remittance shall either be received in account of Pakistani national sending the vehicle from abroad or, in case, his account is non-existent or inoperative, in the account of his family.

December 19, 2020