Home Business Auto-industry takes a major hit, bookings decline

Auto-industry takes a major hit, bookings decline


News Desk |

To no surprise, Pakistani auto-industry is facing a massive 30 percent plunge in sales this fiscal year, as compared to the last fiscal, where 2,40,000 bookings were recorded, against an expected decline to 168,000. The reason: the government of Pakistan, in May 2018, decided to curtail non-filers of tax from purchasing and registering new vehicles in their name.

The ban came in effect from the July 1st. The automotive industry experts had predicted this decline and it has come into motion a little earlier than its forecast. The levying of the non-filer of tax returns ban has hit the low-engine capacity car market. The low-engine capacity car segment below 1000cc vehicle category is dominated by Pak Suzuki Motor and it posted a major decrease in sales last month with volumes falling 27 percent to 8,683 units on a year-on-year basis.

“It will jeopardize all our efforts to counter the menace of premium, as the decision will motivate investors to buy cars and sell to non-filers on a hefty premium”.

The biggest fall in sales was registered in its Ravi and Mehran variants of 50 percent and 42 percent respectively in August. Also, a local publication reported that the value of yearly sales of the automobile industry would experience a major fall of Rs100.80 billion, according to an anonymous source.

Eventually, this would contribute to the tax collection of the Federal Board of Revenue (FBR) to decline by Rs32.25 billion since 32 percent of a car’s price constitutes of taxes. Moreover, the source reportedly said “The ban, if it persists, will lead to a reduction of 2,500 assembler jobs while 12,500 persons, directly and indirectly working for vendor plants, will also lose employment.

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It will cause a slowdown in the large-scale manufacturing industry and GDP growth.” Earlier this year, two of the big three in the Pakistani auto industry were barred non-filer customers including individuals and corporate entities from booking their vehicles, GVS earlier reported. The decision confirmed to the recently passed Finance Act 2018 which prevents non-filers of income tax returns from booking and registering new vehicles from July 1, 2018.

“Any application for booking, registration of purchases of a new locally manufactured motor vehicle or first registration of an imported vehicle shall not be accepted or processed by any vehicle registering authority of excise and taxation department or a manufacturer of a motor vehicle respectively, unless the person is a filer,” the Finance Bill FY19 said.

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The auto sector had already shown its reservations over the government’s decision. Stakeholders said that this would encourage investors to buy cars and sell them on premium to non-filers. A local publication quoted an industry official; “It will jeopardize all our efforts to counter the menace of premium, as the decision will motivate investors to buy cars and sell to non-filers on a hefty premium”.

The officials advised that the government should charge extra tax from non-filers which will increase the revenue. However, the government is already charging additional taxes from non-filers which haven’t proved to be very effective in increasing the tax net.

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