Federal excise duty on cars may go

[Naveed Yaseen]

SOHAIL SARFRAZ
ISLAMABAD (June 09 2009): The government may withdraw federal excise duty (FED) on import and local supply of motorcars in the upcoming budget for 2009-10. It is learnt that the Federal Board of Revenue (FBR) has forwarded a budget proposal to the Ministry of Finance for withdrawal of excise duty on motorcars. In case the government agrees with the proposal, the decision would be instrumental in bringing down the prices of locally manufactured cars.

In the 2008-09 budget, the government had levied FED @ 5 percent on imported as well as on locally manufactured cars on engine capacity exceeding 850cc. The justification for the levy of the duty was based on the assumption that motorcars are a luxury item in most of the developing world, including Pakistan. The FBR had estimated collecting additional revenue of Rs 3 billion in 2008-09 from this excise duty.

During the first six months of current fiscal year, Rs 1,139 million was collected under this head. The realised amount was 38 percent of yearly projected revenue. Further bifurcation showed that a major chunk, of Rs 927 million, had been collected from the domestic car manufacturing sector, whereas only Rs 211 million was collected at the import stage.

It is now being proposed to abolish this duty to facilitate the general public. Its withdrawal would reduce the cost of cars in the country and, at the same time, promote the car industry as well as downstream industries as a consequence. Tax authorities have forwarded the proposal to the Finance Ministry for consideration in the coming budget.

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