Measures to Control 'Own Money' on Cars Proposed by the FTO
  Sep 02, 2023      

Measures to Control 'Own Money' on Cars Proposed by the FTO:

In the forthcoming budget, the Federal Tax Ombudsman (FTO) has suggested measures to the Federal Board of Revenue (FBR) to manage the phenomena of "own money" in the vehicle sector (2022-23).

Dealers have been charging their own money for various makes and models of locally produced automobiles. In this regard, the FBR has received a budget proposal for the coming fiscal year from the FTO office.

According to the FTO, automakers book new automobiles through their dealers on a partial payment basis and do not take full payment pay orders/drafts at first. They do this to take advantage of time and price increases.

The FTO has suggested that dealers be instructed to accept full payment pay orders at the time of booking, saving customers from price increases and reducing own money on automobiles.

In a recent ruling, the Federal Tax Ombudsman (FTO) Dr Asif Mahmood Jah instructed the Federal Board of Revenue (FBR) to guarantee that consumers of automobiles who have been waiting for more than 60 days get paid Kibor plus 3% every year.

According to the FTO's instructions to the FBR, a number of taxpayers had filed complaints with the FTO claiming that they had incurred a great deal of emotional and financial distress as a result of the additional financial burden imposed by the delayed delivery.

In light of SRO 837 (1)/2021, Dr Jah has directed the FBR to not only ensure compliance with clause (ii)(xivb), but also to submit detailed statements biannually to the Engineering Development Board (EDB) or Input/Output Co-Efficient Organisation (IOCO) reflecting details of compensation paid to customers who receive delivery after 60 days.

Importers–cum-assemblers have consistently delayed deliveries, according to the FTO office, and have failed to follow the SRO's requirements, which require payment of Kibor + 3% to consumers for late deliveries.

According to a report published last year by the Pakistan Institute of Development Economics (PIDE), automobile buyers spent Rs. 150 to 170 billion in "own money" transactions in the previous five years.

Own money is a premium imposed by dealers over and above the vehicle price in exchange for fast delivery of cars owing to market shortages.