LAHORE: The Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) has voiced serious concerns regarding the proposed increase in sales tax from 18 percent to 25 percent on automobiles. This move, if implemented, could potentially raise car prices to as high as Rs4 million or above.
PAAPAM’s leadership, consisting of Chairman Abdul Rehman Aizaz, SCV Mumsahd Ali, and VC Taufique Sherwani, collectively assert that the previous decision to raise sales tax to 25% on 1400 cc cars, coupled with other taxation measures and rupee devaluation, has already led to a significant decline in automobile sales, plummeting to just 30% of 2021-22 levels.
This sharp downturn not only pressures the parts manufacturing sector and diminishes employment opportunities but also results in a decrease in overall tax revenue from the sector.
Drawing attention to current challenges such as escalating energy prices, a 160% devaluation of the currency in a mere six years, exorbitantly high financing rates, and over 40% taxation on each car sold, PAAPAM highlights how these factors have already restricted sales to a mere 100,000 Cars/SUVs, despite an installed capacity of 500,000 vehicles.
They note that automobile production and sales have been steadily declining over the past five years, emphasizing that automobiles are demand-sensitive goods whose sales would further decline with a rise in prices. Additionally, the proposed GST increase would prove counterproductive.
Expressing surprise at the government’s decision to maintain unchanged taxes on imported used cars, PAAPAM argues that this policy indirectly favors imported vehicles over locally manufactured ones, causing a loss of foreign exchange and legitimate revenue for the government.
PAAPAM’s leadership warns that the Economic Coordination Committee’s proposal to increase general sales tax to 25% on locally produced vehicles of 1,400cc and above would result in both a reduction in sales volume and revenue. They doubt that such a GST hike would effectively generate additional revenue.
Moreover, they stress that raising the GST to 25% for small-sized sedans would render prices unaffordable for the country’s middle class, leading to lower sales and consequently reduced tax collection.
PAAPAM urges the authorities to refrain from further burdening the local automobile industry with additional taxes and requests dialogue with the government before implementing any further tax measures on automobiles.
Copyright Business Recorder, 2024
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