PAMA proposes cut in duties, taxes

KARACHI: The Pakistan Automotive Manufacturers Association (PAMA), in its budget proposal for 2016/17 has urged the government to reduce taxes on import of raw material and cut the withholding tax. 

A statement issued Wednesday said that certain categories of steel materials (sheets), not manufactured locally were subject to regulatory duty. These form the basic raw material for component or sub-components of the automotive industry. PAMA has proposed to exempt the raw material from the duty.  

Similarly, PAMA said the one percent additional custom duty on imports of certain goods and an additional duty on input items like raw material, component, sub-components and complete knock-down (CKD) kit of the automotive industry that are not manufactured locally, have impacted the highly cost sensitive sector.

“Custom duty on machinery, parts, dyes, moulds, and tools should be reduced from the present rate of 5 percent to zero percent,” proposed PAMA.

The association justified the proposal by stating the industry was growing and making investment attractive and lowering initial investment would encourage local manufacturing.

PAMA also proposed that motorcycle dealer/retailer should be included into the exempted category. “Motorcycle being a high unit cost item warrants special treatment, otherwise the excessive refund will tie up the working capital of the dealers and make his business unviable,” reasoned the association.

“Withholding tax on the proceeds of exported good at the rate of one percent should be reduced to 0.5 percent as recommended by the Engineering Development Board (EDB) in the National Engineering and Exports Development Strategy (NEEDS) report in 2010,” proposed the association.  

Automobile sector is not zero rated and the whole chain was already heavily taxed, so this withholding tax was very harsh for export.

“Since, this deduction is mandatory and considered as final payment, the exporters of the engineering products have to bear this cost even when they are exporting on marginal profits or making a loss,” said PAMA, adding that the withholding tax should be reduced to make the exports more competitive in the international market.