Commerce ministry approves tax payment system for imported cars

KARACHI: Ministry of Commerce approved a mechanism devised by the central bank for payment of duty and taxes on import of vehicles under personal baggage, transfer of residence and gift schemes.

The commerce ministry, in a statement last week, said it supports the mechanism of the State Bank of Pakistan (SBP) under which if vehicles are imported “under personal baggage, transfer of residence or gift scheme the remittance for payment of duties and taxes should originate from the (bank) account of Pakistan’s national sending the vehicle from abroad”.

The remittance should either be received in local bank account of Pakistani national sending the vehicle from abroad or, in case his account is non-existent/inoperative the remittance should be received in the account of overseas Pakistani’s family member as defined in the import policy order, the statement added.

In October 2017, the commerce ministry said all duties and taxes on imported vehicles in new or used conditions, either under personal baggage or gift scheme, would be paid out of foreign exchange arranged by Pakistani nationals or local recipient supported by bank encashment certificate showing conversion of local currency.

The objective was to curb the misuse of schemes envisaged for overseas Pakistanis and rationalise car imports. Industry officials said the decision would hurt car traders and affect the economy as a whole.

The country imports 65,000 to 70,000 cars in a year, contributing Rs60 to 70 billion in revenue to national exchequer. Imported cars dealers said the decision would dent the government revenue collection.

Karachi Customs collects half of its revenue in shape of duties and taxes. Moreover, if the importers resort to buying dollars it would increase the rate of US dollar in the open market, they added.

An official said the commerce division’s plan could not be implemented as the importers and other stakeholders have already approached a local court against the ministry’s order.

The court will conduct hearing on the case on January 23, the official added. The central bank formulated the mechanism to streamline the transfer of foreign exchange through formal channel against the duty and taxes applicable on import of vehicles.

A car importer said the order, if implemented, will discourage the import of used cars and allow the existing local assemblers to strengthen oligopoly.

Local assemblers come under criticism for increasing prices and lack of competition leaves customers with no other option but to buy local cars.