Used cars import: FBR urged to increase depreciation

The Ministry of Commerce has requested the Federal Board of Revenue (FBR) to increase depreciation on used imported cars by 10 per cent in accordance with the decision taken by the Economic Co-ordination Committee (ECC), sources told Business Recorder here on Thursday.
The ECC, in its meeting on March 1, 2011 decided that depreciation in assessable value shall be at the level of 1 per cent per month up to a maximum of 60 per cent on the import of cars. The ECC also directed Ministry of Commerce to make a detailed presentation to the ECC in its next meeting on import of used cars and to increase the age limit of trucks, tractors, vans and buses etc from three to five years.
"FBR is requested to implement the ECC decision by issuing amendment in the relevant notification," the sources quoted Commerce Ministry as writing in a letter to Chairman FBR Salman Siddique. The decision of the ECC is yet to be ratified by the federal cabinet under Rules of Business of 1973. The cabinet was about to certify the March 1 decision of the ECC on March 9, 2011 but the meeting was cancelled due to the demise of Khalid Ghurki, spouse of federal Minister Sameena Ghurki. The cabinet is expected to meet next week now.
Annalists say that increase in depreciation limit from 50 to 60 per cent will have a negative impact on revenue received from the local auto sector but the Ministry of Industries and Production and Ministry of Commerce argued in the ECC meeting that age relaxation will not have negative impact on the local industry.
It was noted that when the age limit of cars under baggage schemes was relaxed from three to five years and the condition of registration was dispensed with in the year 2005-06, the number of used cars imported under these schemes was only 38,499 units against the local production of 170,487 units. There was no negative impact on domestic production volume which was over 170,000 units during that year.
The country's auto industry claims that the prices of different models of cars are lower than the same models in the region ie India, Thailand and China etc. Insiders in Pakistan Automotive Manufacturers Association (PAMA), which is facing a split amongst its members, firmly believe that increase in depreciation from 50 to 60 per cent is due to hectic lobbying by used cars importers who personally approached President Asif Ali Zardari besides other top government functionaries.
However, PAMA which is considered more influential than importers of used cars did not form a cohesive group to counter the lobbying by importers of used cars because of internal rifts in the Association but they have decided to be more proactive. The sources said ECC directed the Ministry of Industries and Production to make a comprehensive presentation to the committee on reduction of duty on CKD kits for new entrants, following consultation with relevant stakeholders. The MoI&P has also been directed to draft a comprehensive transport policy in consultation with all stakeholders and submit it to the federal cabinet for approval.