The collection of withholding income tax from the sales of new cars by manufacturers in Pakistan has seen a notable uptick, marking a 28 percent increase during the first eight months of the fiscal year 2020/2021.
(more…)Category: Automotive
PkRevenue provides stories related to automotive industry. We focus on auto policy of Pakistan. The coverage also includes sales of domestic manufacturing.
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Car sales increase by 24 percent in eight months
KARACHI: The sales of locally manufactured motor cars registered an increase of 24 percent during first eight months (July – February) 2020/2021 owing to pick up in economic activity and lower policy rate.
According to data released by Pakistan Automotive Manufacturers Association (PAMA) the sales of locally manufactured motor cars increased to 113,836 units during first eight months of the current fiscal year as compared with 91,515 units in the corresponding months of the last fiscal year.
Analysts at Arif Habib Limited attributed the increase to pick up in economic activity resulting in high demand of automobiles. Further, lower policy rate also helped in growth of car sales.
A growth of 35 percent witnessed in February 2021 on year on year basis to 16,436 units when compared with 12,183 units in February 2020.
Analysts at Topline Securities said that Pak Suzuki (PSMC) has yet again successively taken the lead with a massive increase of 66 percent YoY.
The rise is primarily driven by Alto and Ravi with sales of 4,245 (+162 percent YoY) and 1,268 (106 percent YoY) units in Feb-2021, respectively.
Honda Car (HCAR) registered sales increase of 13 percent YoY, while INDU’s sales declined by 3 percent YoY.
New entrants into Pak Auto space, Hyundai Nishat sold 651 units in Feb-2021, while Lucky Motor sold ~2,500 units, as per our channel checks.
Passenger Car sales declined by 6 percent MoM in Feb-2021. The decrease in numbers has been on the back of decline in INDU sales (-20 percent MoM) largely due to seasonally high January sales and some supply-side disruptions.
Atlas Honda (ATLH) recorded motorbike sales of 104,005 units in Feb-2021, up 16 percent YoY. In 8MFY21, sales have increased by 19 percent YoY.
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Commission issues notice to Hyundai Nishat Motors for deceptive marketing
ISLAMABAD: Competition Commission of Pakistan (CCP) has issued a show cause notice to M/s. Hyundai Nisha Motors Pvt Limited for explaining deceptive marketing practice for sale of its new Hyundai Tucson.
The CCP in a statement issued on Tuesday said that it had taken a suo moto notice of the advertisement published in print media and on various social media platforms publicizing the introductory price of Hyundai Tucson with a disclaimer, ‘for a limited period only.’ In these advertisements, though the introductory price was visibly printed in large font size, yet the disclaimer was not easily noticeable as it was printed much smaller font size.
Moreover, it was also brought to the CCP;s notice that the initial booking period for Hyundai Tucson with the introductory price lasted for less than 24 hours, and then the price was raised by Rs200,000. Within 24 hours of initial bookings, the company declared that all units of Tucson at the introductory price were booked and the introductory price list was removed from its website, Facebook and Instagram pages.
The CCP’s Office of Fair Trade (OFT) in its inquiry found that advertisement to be problematic in the position of the disclaimer could potentially mislead the consumers. Moreover, the advertisement left the overall impression that the company did not clearly indicate to consumers: (i) the period in which the introductory pries would apply, and (ii) the number of vehicles that were available at the price point, thereby, prima facie, violating provisions of Section 10 of the Competition Act.
On the enquiry’s recommendations, a show cause notice has been served on M/s. Hyundai Nishat Motor (Pvt) Limited company and the company has been given 14 days to respond.
CCP is mandated under the Competition Act to ensure fair competition in all spheres of commercial and economic activity to enhance economic efficiency and to protect consumers from deceptive marketing practices.
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FBR collects Rs1.53 billion as withholding tax from new car sales, registration
KARACHI: The tax authorities have collected Rs1.53 billion as withholding tax from new car sales and registration during seven months (July – January) of the current fiscal year.
The Inland Revenue offices of the Federal Board of Revenue (FBR) located in Karachi have collected Rs1.53 billion as withholding tax on new car sales and registration during first seven months of the current fiscal year as compared with Rs959 million in the corresponding months of the last fiscal year, according to official statistics made available to PkRevenue.com.
Motor registration authorities and car manufacturers collect withholding tax at the time of registration and sale of new car under Section 231B of the Income Tax Ordinance, 2001 on behalf of the FBR.
The tax collection at the time of sale by manufacturers increased to Rs616 million during first seven months of the current fiscal year as compared with Rs428 million in the corresponding months of the last fiscal year, showing an increase of 44 percent.
Similarly, the tax collection at the time of registration of new cars by provincial motor vehicle registration authorities sharply increased by 70 percent to Rs914 million during first seven months of the current fiscal year as compared with Rs531 million in the corresponding period of the last fiscal year.
The sharp increase in revenue collection under this head may be attributed to revival of economic activities after relaxation in restriction that were imposed to prevent coronavirus spread.
The sale of locally manufactured cars registered an increase of 23 percent to 97,469 units during first seven months of the current fiscal year to 79,458 units in the same period of the last fiscal year.
The growth has been seen even more higher while comparing the sale on year on year basis in January 2021. The car sales posted 46 percent to 17,515 units in January 2021 as compared with 11,964 units in the same month of the last year.
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Car import jumps up by 166 percent in seven months
ISLAMABAD: The import of used and old cars recorded a growth of 166 percent during first seven months (July – January) of 2020/2021 owing to significant decline in coronavirus cases and relaxation in economic activities by easing COVID lockdown.
According to data released by Pakistan Bureau of Statistics (PBS) on Wednesday, the import payment for used and old cars surged to $116 million during first seven months of the current fiscal year as compared with $43.64 million in the corresponding months of the last fiscal year.
Sources in Pakistan Customs attributed the growth in imported cars to ease in travel restriction following decline in coronavirus cases across the world and start of vaccination to cure the pandemic.
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 is 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.
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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.
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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.
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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.
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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.
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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.