Zero rated exemption on commercial vehicles (trucks, buses and CNG buses) will have a strong inflationary impact for consumers while commuters will also suffer from all but inevitable higher fares for transportation.
Hinopak Motors Limited DGM Sales & Business Development Shahab Anwar in his statement stressed that the automobile industry is facing a host of economic problems for almost two years such as escalating values of the foreign currencies, depreciating value of the Pakistani rupee and the ramshackle state of the economy.
He claimed that power cuts and double digit inflation compounded by natural calamities has already badly affected the automobile industry. So in the recent budget imposition of GST on commercial vehicles will completely devastate the commercial automobile industry which is already declining and working on almost half of its capacity, he added.
In the current budget the government has removed zero rated exemption (through SRO 486 (1)/2011) on commercial vehicles (trucks, buses and CNG buses) which is detrimental to the automobile industry. He said the zero rating facility was extended to the commercial automobile sector in 2006 given that it was of strategic importance as modernisation of the trucking industry is vital so that Pakistan can cope with its transportation requirements.
He noted a disparity in government policies. On one hand, the government has yet again decided to defer the Auto Industry Development Plan (AIDP) in this budget. Hence, there will be no increase in import duty of advanced auto parts. AIDP envisages an increase to 50 percent from 32.5 percent. On the other hand, import duties on other items were expected to be fall to 30 percent from 32.5 percent. Overall, the deferment is to have a positive effect on the margins of local auto assemblers.
It is pertinent to mention that a reduction in GST is likely to result in a price reduction of 3.5 percent of locally manufactured cars with effect from July 1, 2011. The government had relaxed the auto import policy by allowing cars up to five years of age and increasing the cap on deprecation allowance to 60 percent from 50 percent permitted earlier.
