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ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet, which is scheduled to meet on Friday (today) will consider Auto Industry Development and Export Policy (AIDEP) 2021-26 and Small and Medium Enterprises Policy (SMEs) 2021-25, official sources told Business Recorder.

The meeting of the ECC was to be held on December 8, 2021, which has been rescheduled for Friday (today) to be presided over by Minister for Economic Affairs Omar Ayub Khan.

Automotive Development Policy (ADP) 2016-21 expired on 30th June 2021, which attracted investment of more than USD 1 billion in cars, sports utility vehicles, light and heavy commercial vehicles in collaboration with Chinese, European, Malaysian and Korean Principals.

Nine companies have already started manufacturing of various types of vehicles whereas 3-4 companies are expected to start their operations in the current financial year.

The sources said incentives under ADP 2016-21 mainly included import of Completely Knocked Down (CKD) Kits at concessionary rate of custom duty and import of certain units in Completely Built Condition (CBU) in limited number at 50% of prevailing custom duty for test marketing.

ECC informed: SME policy to ensure NFIS 2023 implementation

It has been felt that the auto sector in the country needs directions with the help of Government incentives. A new proposed Auto Industry Development and Export Policy (AIDEP) 2021-26 has been formulated with focus on the following objectives: (i) affordability of small cars to Pakistani customers;(ii) Ensuring better quality and safety features in cars;(ii) creating further competition among car manufacturers;(iii) localization/ indigenization of auto parts and their exports;(iv) formulation of legal framework for auto sector;(v) steps for market growth/ maximizing production of vehicles in the country and ;(vi) removal of anomalies/ loopholes in previous policy and promotion of new technologies.

Government has tried to support the auto industry and the investor through different fiscal and administrative measures. Intention is to brace the local auto industry through localization of parts and equipment. In order to meet the objective, government intends to review the concessions and fiscal regime on annual basis in consultation with the stakeholders.

There are certain fiscal measures, some of which have already been approved and some are part of this policy but need to be incorporated in relevant statutes by the concerned authorities.

The changes may be made part of the relevant legal statutes through an appropriate legal instrument during the current financial year or at the time of next financial budget.

A draft summary was circulated to various stakeholders including FBR/ Revenue Division, Ministry of Communications, Ministry of Commerce, Ministry of Planning, Development and Special Initiatives, Ministry of Climate Change, Board of Investment, Finance Division, Ministry of Science and Technology, Ministry of Energy (Power Division), Ministry of Energy (Petroleum Division), Ministry of Law and Justice, State Bank of Pakistan, Ministry of Foreign Affairs and Excise & Taxation Departments of Punjab, Sindh, Khyber Pakhtunkhwa, Balochistan, AJK and Gilgit-Baltistan.

This Ministry also forwarded reminders on October 14, November 19, 2021 and November 25, 2021 to provide views/ comments to Ministry of Planning, Development and Special Initiatives, Board of Investment, Ministry of Law and Justice, FBR, Ministry of Energy (Petroleum Division), Ministry of Commerce, Ministry of Science and Technology, State Bank of Pakistan, Finance Division, Ministry of Energy (Power Division), Ministry of Climate Change and Excise & Taxation Department of Balochistan.

The ECC will also reconsider the Small and Medium Enterprises (SMEs) Policy, 2021-25 as it was deferred by the ECC on November 15, 2021, after Prime Minister’s Advisor on Finance and Revenue, Shaukat Tarin proposed some changes in it. A Committee was also constituted to finalise the policy draft and submit to the ECC.

Ministry of Industries and Production has also proposed few additions meant to add IT and IT-enabled services in the domain of SME.

New auto policy: ‘Ministry likely to take draft to govt for approval in 2 weeks’

Chairman ECC, Omar Ayub Khan also proposed that revamping of SMEDA and financing of SMEs from the formal sector be enhanced. He said, financing be increased to 3 million in next few years as presently only 170,000 SMEs out of 5 million are being given loans.

The MoI&P has proposed tax reduction of between 67 per cent and 83 per cent whereas minimum turnover tax will be 0.25per cent and 0.5 per cent or flat tax rate of 7.5 per cent and 15 per cent.

There will be presumptive regime without any audit and sans harassment; online and simple tax filing, inclusion of IT and ITES, and gradual reduction in withholding tax with corresponding increase in formalization, sales/ Income Tax receipts.

The annual turnover for category I SMEs has been proposed at Rs 100 million while in category II, annual sales turnover will be between Rs 100 million to Rs250 million.

The banks will fix credit line of Rs 60 billion under SME Asaan Finance Scheme (SAAF) for collateral-free lending.

Each SME will get loans up to Rs 10 million, with three years’ tenure. The number of borrowers will be approximately 30,000, while credit risk guarantee will be 40-60 per cent. The government will also extend a subsidy of Rs 25 billion.

The sources said collateral free financing for SMEs will be based on size, sector, geography and gender.

The new SME policy has proposed 19,584 plots for SMEs, of which 1380 plots will be allocated in National Industrial Parks, 5,675 in KP, 11,892 in Punjab and 637 in Balochistan.

For the development of women entrepreneurship 25 percent tax reduction in tax liability for income from business where banking will be based on equality policy for financial inclusion of women. Women-specific business incubation will be established along with display facilities with business development support programs.

Copyright Business Recorder, 2021

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