50% customs levy on the import of "Mild Hybrid Cars"

The Federal Board of Revenue's (FBR) customs classification committee announced a 50% customs levy on the import of "Mild Hybrid Cars" and stated that vehicles without electric motors cannot be labeled as hybrid vehicles to receive tax breaks.

The FBR's classification committee ruled against the importer's assertion.

Vehicles having an electric power source, such as an integrated alternator/starter, that is utilized exclusively for non-propulsion purposes are not classed as HEVs, according to the Classification Committee. These power sources may feature regenerative braking and charge management systems, and they can be utilized to power stop-start systems.

These vehicles lack an electric motor for propulsion, yet they may be described as having "hybrid technology" or being a "micro-hybrid". Therefore, hybrid cars are those that use an electric motor for propulsion.

The Classification Committee noted that these cars have been produced and are outfitted with hybrid technology features by the report and insignia to accomplish several desirables, such as operating stop-start systems and charge management systems, etc. However, these vehicles have officially been reported not to have an electric motor for propulsion based on a physical assessment of their operation and features.

The Federal Tax Ombudsman (FTO) issued Findings/Recommendations/Order dated December 12, 2022, directing the Collectorate of Customs Appraisal, West, Karachi to send the categorization of the complainant's imported automobiles to the Classification Centre.

Briefly stated facts are that the complainant imported "Used Nisan Dayz Hybrid Cars," "Used Suzuki Wagon-R Hybrid Cars," and "Used Suzuki Hustler Hybrid Cars" and claimed the benefit of reduced rates of duties and taxes under SRO 499(1)/2013 dated 12.06.2013. However, this was not permitted in light of the Circular dated 05.10.2018 issued by the Collectorate of Customs, Appraisement-West, Karachi,

The FTO decided the importers'/complainants' concerns by the aforementioned order directing the case to the Classification Center.

On the other side, representatives of the importers/complainants argued that various fora had previously ruled that the circular from October 5, 2018, was invalid.

He argued that under SRO 499(1)/2013, which was issued on June 12, 2013, automobiles using hybrid technology are eligible for reduced rates of customs and taxes.

The representative also emphasized that SRO 499(1)/2013, dated 12.06.2013, does not distinguish between different vehicle types and/or contains words like "Hybrid like," "Mild Hybrid," or "Micro Hybrid," and only states "Hybrid Electric Vehicles (HEVs) falling under PCT Code 87.03." The Classification Committee finds no disagreement with this statement to be true given the facts.

The Classification Committee noted that under Chapter-II (Classification) of COO 12/2002 dated 15.06.2002, the scope and mandate of the Classification Committee is limited to the determination of goods' classification and does not have vested authority, powers, or a mandate to determine the applicability of and interpret any concessionary regime in respect of imported goods, which fall under the jurisdiction and domain of the Clearance Collectorates, the Board, and the Committee. As a result, the Classification Committee continued to decide how to classify the disputed automobiles, according to the committee.

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