Relief On Small Imported Cars Annoys Local Auto Sector

The new fiscal budget for 2024–25 has enraged the local automakers and encouraged them to take their ire on the road in addition to imposing higher taxes and charges on automobiles. The underlying issues surrounding the tax exemption for tiny imported automobiles are nothing new and are the cause of this episode.
The current government imposed a 15% regulatory charge (RD) on used automobiles over 1300cc in Finance Bill 2024–25, leaving off the category of vehicles with engines smaller than 1300cc. Interestingly, local automakers have taken offense at this portion.

Engine Capacity	RD on Hybrid Cars (%)	RD on Petrol Cars (%)
0-1300cc	–	–
1300-1800cc	16%	16%
Above 1800cc	15%	70-90%

The Pakistan Automotive Manufacturers Association (PAMA) expressed alarm in a letter to Prime Minister Shahbaz Sharif by pointing out data for the January–May 2024 period, which shows that over 62% of used cars imported are under 1300cc.

The suggestions

But PAMA also made the following suggestions:
Apply a 15% regulatory duty (RD) to the import of automobiles with engines smaller than 1300cc, while keeping the present rate of recently imposed RD on engines larger than 1300cc.
The government lost a lot of money when SRO 577 (I) 2005, which was last modified in 2015, is still in operation. It is no longer viable to impose taxes based on antiquated principles. It is required to make a change to reflect current market pricing.

The Letter from PAAPAM

Apart from PAMA, the head of PAAPAM, the Pakistan Association of Automotive Parts and Accessories Manufacturers, Abdul Rehman Aziz, has also voiced his concerns, stating that the government will implement steps to stop the illicit importation of old cars. We are dismayed with the most recent budget for 2024–25, though.
Unfortunately, he noted, cars with displacements under 1,300cc cc make up 70% of used car imports and are not subject to the new regulation fee. Mr. Aziz stated that the car sector in Pakistan was anticipating 135,000 vehicles sold overall. But he was worried that around a quarter of the units—35,000—would be imported secondhand cars.

The industry is blaming the flood of used cars—which are exempt from the new regulations about smaller engines—for hurting sales of locally produced automobiles and creating job losses. According to Mr. Aziz, this tendency resulted in over 50,000 Pakistanis losing their employment in the fiscal year 2023–2024.

Before the Finance Bill 2024–25's proposal earlier in March, local automakers and vendors expressed similar worries, emphasizing how the rise in small vehicle imports is negatively affecting them.

Arifa Hussain

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