IMC proposes government to slash turnover tax to 0.5 percent on dealership

Following immense number of complaints regarding the premium being collected by the car dealers, the Indus Motor Company (IMC) has proposed the government to slash turnover tax to 0.5 percent on dealership in order to commence wholesale-retail concept, which will help eradicating premium culture. This was disclosed by CEO IMC Ali Asghar Jamali during a media workshop "The Future Vision of Auto Industry," organised by the IMC at local hotel here.
He said that wholesale-retail concept was one of the viable solutions, which could prevent car dealers to collect premium from the costumers. Meanwhile, market sources said that the Federal Board of Revenue (FBR) which made Original Equipment Manufacturers (OEMs) as its withholding agents to collect tax from car dealers, was reluctant to support wholesale-retail concept as the possibilities of revenue leakage could not be ruled out if the same was implemented because the field formation of FBR was not capable to collect the same from car dealers, efficiently.
In addition, the car dealers, who presently make car bookings and minting millions with no investments on account of commission and premium, will also oppose the wholesale-retail concept as if this concept was materialized, they have to make huge investments to purchase vehicles from wholesalers (OEMs) and retail the same to the customers. However, Jamali appears optimistic, saying that he discussed it with federal finance minister Muhammad Ishaq Dar, who gave him assurance to find the best way out from this issue. He also suggested to impose 0.1 million tax, if the vehicle was sold within six months, which he termed as second option to avoid investors manipulating the market.
Moreover, he said that Toyota Motors was presently producing 60-65 thousand vehicles in Pakistan out of its total global production of around 10 million in 170 countries; adding IMC was the 4th highest Toyota Corolla seller in the world, contributing 1.2 per cent of overall government revenue collection.
Replying to a question, he said that IMC was also working on capacity enhancement but it was mainly linked with the production enhancement of its vendors as the company's daily procurement of local parts was amounting to Rs 15 million; hoping that IMC would increase its production to 75000 by year 2018.
He answered that the issue of imported used cars was not as major obstacle as being projected because when the local production was increased, the demand of used cars would consequentially reduce to none. However, Aamir Allawala, former chairman Pakistan Association of Auto Parts and Accessories Manufacturers (PAAPAM) in his electronic presentation termed the import of used cars as biggest obstacle in terms of pouring new investments in the sector, saying that around 46500 used cars worth Rs 69.75 billion averagely were imported only in 2016.
He said that the import of used cars was also not only promoting black economy but it cost Rs 16 billion to the local industry only in 2016, despite the fact that industry was contributing Rs 120 billion and among the top 10 revenue generation industry.
Moreover, he said that around 70 percent and 90 percent localization was made in passengers' cars and bikes, respectively; adding that auto industry was presently producing around 236,500 vehicles and 2.3 million bikes per annum and hoped to hit 0.5 million production-mark by 2022.
Furthermore, Allawala said that three new players including Hyundai, KIA and Renault were planning to install assembly plants in Pakistan and existing players were looking for plant expansion, which would help the government to achieve GDP growth target. Later, Mashood Ali Khan, Chairman PAAPAM said that they started reinvesting in the sector in order to get maximum benefits from new opportunities being generated after CPEC. A large number of journalists from Karachi, Islamabad and Lahore attended the workshop.