Local Auto Industry Calls for Reduction in Tax Rates to Help Them Survive


As the coronavirus continues to pummel the economy, industries suffer, with most of the brunt arguably borne by the automotive industry. On a related subject, automakers in Pakistan are asking for tax reduction, so as to continue their operations without bearing lofty expenses.

The approval of Finance Bill 2020 resulted in a hike in tax rates for various vehicle segments, whereby Direct General Abdul Waheed Khan had already expressed his displeasure, saying that,

The sector was hoping that government will at least slash unnecessary taxes including, Additional Sales Tax (AST), Additional Customs Duty (ACD), and Federal Excise Duty (FED) of 2.5-7.5%, depending on turnover tax and engine displacement,

Echoing the same concerns pertaining to the fate of the automotive industry, former Chairman Pakistan Association of Automotive Parts and Accessories Manufacturers’ (PAAPAM) Mr. Mashood Ali Khan highlighted that the entire automotive industry had their sights set on 2020 to be the year of success for them. However, with the outbreak of COVID-19, with the economy and industries taking a severe hit, those hopes have been quashed.

He further stated that in such circumstances, the government should offer relaxation to the industries to help them survive but instead, “we were burdened with additional Customs Duty of 7-11% and Federal Excise Duty (FED) of up to 7.5%.”

According to Mr. Mashood Ali Khan, a series of events lead to the current dire state of the industry. In fact, the industry had been on a downward trajectory since July 2019, following the government’s announcement of not allowing non-tax filers to register more than one car against their CNIC. Then came the additional Customs Duties and FED.

“Then, we placed our hopes on new vehicle models to boost the sales but the coronavirus outbreak resulted in zero car sales in April 2020, and instead of going up, we have gone down in production. Now, we only hope that the government to provide relief through tax concessions.” Mr. Khan continued, stressing on the bleak picture of the automotive industry at the moment.

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