Impact of Budget 2017-18 on Automobile Industry

Budget 2017 Cars

Impact of Budget 2017-18 on Automobile Industry

Although there was great anticipation among the stakeholders of Pakistan’s automobile industry prior to the announcement of the Federal Budget, It turned out It had nothing significant to offer investors. Perhaps the only major step up, in terms of last year’s Automobile Policy, was the encouragement given to fuel-conserving, environment-friendly electric cars thanks to a reduction in their sales tax and an indication that import duties may be reduced within the next three months. There were also a few other positive signs. Foremost was the reduction of the withholding tax on registration fees for new vehicles by 20 to 25% (Rs 2,500-5,000) for cars with 850 to 1300cc engines for tax filers. However, most experts are of the view that this amount is not substantial enough to convince people who do not file their taxes to do so.

Although there was great anticipation among the stakeholders of Pakistan’s automobile industry prior to the announcement of the Federal Budget, It turned out It had nothing significant to offer investors. Perhaps the only major step up, in terms of last year’s Automobile Policy, was the encouragement given to fuel-conserving, environment-friendly electric cars thanks to a reduction in their sales tax and an indication that import duties may be reduced within the next three months. There were also a few other positive signs. Foremost was the reduction of the withholding tax on registration fees for new vehicles by 20 to 25% (Rs 2,500-5,000) for cars with 850 to 1300cc engines for tax filers. However, most experts are of the view that this amount is not substantial enough to convince people who do not file their taxes to do so.

There was some relief for spare parts stakeholders as duties have been reduced from 10% to five percent. However, most auto parts manufacturers are of the view that this duty should be scrapped altogether, along with the current 30% duty on imported parts and accessories. No changes were announced on two controversial duty structures: the exemption of duty on the Import of 1200cc hybrid cars and the 25% duty on locally produced 1800cc cars.

Analysts are of the view that these policies benefit only ‘a well-off minority, and that a higher duty should be Imposed on hybrid and 1800cc cars, so that the money recovered from them can be used to invest in areas that can benefit the general public, such as Improved public transport. Most stakeholders were of the view that the budget can be termed ‘neutral’ at best, given that it fell short of their expectations. (Mazhar M Chinoy)