Engineering Development Board (EDB) is likely to put forward to finance ministry the joint budget proposal sent by bike manufacturers and vendors through PAMA and PAPAAM in a meeting called for the purpose today 16th March.
The assemblers and vendors of two and three wheelers in their budget proposal have urged the government to rationalize tariff in order to bring down the costs to provide relief to the consumers and also allow the import of machinery, parts and molds at zero duty rates, sources at Manufacturers’ and vendors’ said today. The meeting held in Islamabad under the Chairmanship of CEO EDB Aitezaz Niazi discussed the proposal for the coming budget.
The assemblers have asked EDB to support their proposal enabling the industry to lower unit price of bikes made in Pakistan so that better margins could be achieved through exports as well. According to sources despite recession and adverse economic conditions the bike industry in Pakistan has shown tremendous growth with total production reaching around 1.5 million and targeting 1.7 million mark for next fiscal year, while it has also started exploring new markets in the region for exports.
The industry has already been exporting motorcycles to Bangladesh, South Africa and Afghanistan.
The industry has demanded reduction in CKD rates from 15 percent to 10 percent, while CBU rate should also be reduced from 65 percent to 55 percent. Besides, reduction in sub-assembly from 20 to 10 percent and reduction on duty of components from 10 to 7.5 percent have also been proposed, sources said. While pointing out an anomaly in the SRO 655 they said it provides advantage to non-documented manufacturers because process materials has substantial cost impact on the manufacturing process, but, unfortunately, the definition of process material is not covered in SRO 655(1)/2006. “This is an anomaly as regardless of legislative interpretation they are a cost component of production process and are required to be treated as such,’ they added.
‘It is the misuse and improper implementation of SRO 656 (Manufacturing (Assy. Rules) in letter and spirit that is creating an unfair advantage in the favor of unorganized sector in the two/three wheeler sector of the auto industry,’ they added.
They also demanded that the components attracting lower rates of duty than CKD rate should be allowed at statutory rates. Other budget proposals aimed at accelerate the growth, competitiveness and exploiting the export potential of the industry include: Pak II (Euro II) complaint parts for 2-3 Wheeler sector should be zero rated as after implementation of Pak II (EURO II) the cost of vehicle has gone up. Moreover, restoration of issuance of income tax exemption certificate at import stage to manufacturers; withholding tax on the proceeds of exported good at 01 percent should be reduced to 0.5 percent as recommended by the Engineering Development Board (EDB) in the National Engineering & Exports Development Strategy (NEEDS) report in 2010.
And to promote the business and attract the investment corporate tax rate should be brought down from 35 percent to 30 percent, 25 percent and 20 percent gradually as entities that can prove that 90 percent of their purchases are from registered suppliers get a 2 percent lower corporate tax rate. If the government plans to implement the RGST, the rate of sales tax should be brought down to say 15 percent from existing 16 percent because in addition to other advantages it would make evasion less-attractive and will help increase the tax net.
Their proposals further suggest that section 8-B in the Sales Tax Act, 1990, should be abolished, while the role of Pakistan Automotive Manufacturers Association and & PAAPAM in determining fair value of auto-parts by Federal Board of Revenue should be institutionalized with active participation of Engineering Development Board. In order to develop export markets the government has to support the industry through funding for developing distribution networks and establishment of brand name exercise. It is also proposed that the Research & Development facility should again be made available to the industry of two/three wheelers with proper cover under the scheme, as it will help the industry to remain competitive at least in those markets where they have established their brands.
‘Moreover, listed companies should be allowed to spend upto 50 percent of their contribution on technical training programs, and alternatively the rates of WPPF (Workers Profit Participation Funds.)& WWF (Workers Welfare Funds) be reduced by 50 percent.
