The federal government has decided to impose an additional withholding tax (WHT) on locally-assembled cars, effectively increasing their prices up to Rs. 200,000 per unit, reported Business Recorder.
This measure has been taken as a deterrent to ‘own money’, claims the Ministry of Industries and Production (MoIP). The ministry has taken note of the frequent complaints about delayed delivery of vehicles by manufacturers. This system of unnecessary delays results in the buyers of cars paying additional payments known as ‘Own Money’.
To discourage this practice, MoIP has proposed this WHT on people who buy locally manufactured cars from original equipment manufacturers (OEMs) and sell them within 90 days of delivery. The newspaper reported that the ministry is also proposing an additional WHT of Rs. 50,000 on the engine capacity up to 1000 cc, Rs. 100,000 on up to 2000 cc and Rs. 200,000 on above 2000 cc.
This issue of ‘Own Money’ exploitation was raised in a cabinet meeting, where the attendees of the meeting, including the Prime Minister, were of the view that the import car policy must be reviewed to look into the protection that has allowed the local assemblers to exploit consumers.
Federal Minister for Industries and Production Hammad Azhar pointed out that the automobile industry had been facing difficulties due to the COVID-19 situation, and that had led to this practice of ‘on money’ exploitation again. He said that the situation would likely return to normal considering that manufacturers were ramping up production.
This WHT policy, however, will not apply to electrical vehicles (EVs) for the time being, and individuals interested in EVs may be facilitated through a policy intervention that could not be covered in the approved Electrical Vehicles policy (2-3 Wheelers and HCVs) by the Economic Coordination Committee (ECC) on June 10, 2020.
The waiver of Additional Custom Duty (ACD) and Value Added Tax (VAT) on imports for EVs in completely build units (CBU) condition, is proposed till June 30, 2025.
MoIP has proposed that different fiscal and financial incentives may be offered to promote the import, usage, and manufacturing of EVs and related infrastructure in the country. The inter-ministerial committee constituted by the Federal Cabinet has now finalized the proposals concerning EV Policy (four-wheelers). The proposed fiscal incentives will remain in force till June 30, 2026, the newspaper reported.