ISLAMABAD: Chief executive officer (CEO) of Indus Motors Limited Ali Asghar Jamali has urged the government to adopt globally practiced wholesale-retail mechanism for sales of vehicles which can help counter on-money and delayed delivery of vehicles.
While appreciating the measures taken by the government to curb the premium menace through implementing transfer tax, the issue can further be managed by addressing the sales mechanism.
He said the current system under which new cars were being sold in Pakistan had become unviable for the dealers who on a transaction of around Rs4 million (retail price of 1800cc car) have to pay Rs294,945 as government levies whiles their net commission is only Rs56,760.
He elaborated that the dealer acts as a commission agent under the present system, adding the customer places order through the dealer and makes the required advance payment.
“The dealer dispatches the payment and order to IMC or OEM that generates invoice in customers name and dispatches the car to the dealer that delivers the car to the buyer,” he added. On a car worth Rs3,999,000, he added, the customer/dealer pay WHT under 213 B worth Rs75000. The IMC or OEM pays the dealer commission of Rs64,000 that after deducting WHT of 12 percent comes to Rs56,760.
The dealer has to pay 1.5 percent minimum turnover tax also, that is almost eight times the WHT on commission income. Moreover, he added the withholding tax applicable on purchase by the dealer and later on sales to the customer at a rate of four percent is too high comes to Rs159,960. It is double taxation as well.
He proposed that instead of terming the dealer as commission agent it should be treated as retailer and the manufacturer as wholesaler. This way double taxation would be avoided. The minimum turnover tax then should be reduced from 1.5 percent to 0.25 percent in line with tax applicable of motorcycle distributors, fast moving consumer goods, pharmaceutical and petroleum products.
Besides, the government should exempt withholding tax paid by the distributor at the time of purchase of cars from the manufacturers.
Additionally, the WHT of four percent under 153 should also be withdrawn to eliminate double taxation.
Copyright Business Recorder, 2021
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