Local automobile sector which is going through the gloomiest period ever has demanded the government to reduce the taxes in order to help revive the ailing auto industry which was already battling with nose-diving sales & is now hit hard by the COVID-19 pandemic.
According to former Chairman of Pakistan Association of Automotive Parts and Accessories Manufacturers’ (PAAPAM) Mashood Ali Khan:
“The decline in automobile sector began in July last year when the government announced that non-filers of tax return can register only one vehicle against their CNIC. After that, we were burdened with additional customs duty of 7-11% and federal excise duty of up to 7.5%.”
Then in September and October 2019, the rupee depreciated against the US dollar adversely affecting the automobile sector, he added. The local industry had hoped that 2020 would be a year of revival of automobile demand and data of January and February was also encouraging. However, the numbers were still lower compared to sales figures for the corresponding months of previous year. Then out of nowhere the coronavirus pandemic hit the auto industry hard for which it was never prepared. Sales in April 2020 remained zero due to lockdowns whereas in May the sales registered a deploring 75% year-on-year decline.
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Automakers in Pakistan have assembled a mere 89,284 cars so far in the current fiscal year compared to 196,415 units in the same period of previous year. Sales have witnessed 50% to up to 80% reduction in various vehicle segments.
A few years ago Pakistan assembled around 250,000 cars annually and aimed to hit the 500,000 mark. However “instead of going up, we have gone down in production,” Mashood Ali Khan lamented. “Now, we expect the government to provide relief through tax concessions.” He added that “at present, 18% sales tax is levied on cars. If the government cuts it down to single digit, it will give a huge boost to the entire automobile sector and enhance government earnings as well.”
“Executives from other industries like textile and food used to buy cars, however, they have discontinued purchases since all sectors have been hit by Covid-19 and there is virtually no demand. The automobile industry of many countries is suffering, including India, but their government is giving incentives while our government is not.”
According to PAAPAM former chairman if sales tax was left at the current level, the automobile industry would face further devastation and government’s revenue from the sector would also take a hit. He said that the automobile sector is the third largest taxpayer after the oil and gas industry and telecommunication and contributes 2.8% to the country’s gross domestic product (GDP) and adds Rs 30 billion to the national exchequer in the form of taxes and duties.