KARACHI: Federal Board of Revenue has started serving notices to the auto dealers to deposit two per cent additional tax under SRO 896(I)/2013 on their supplies to retail market and to the assemblers.
Dealers said that the notices being issued by regional tax offices violate the agreement between the tax authority and the stakeholders of auto industry. It was agreed that the industry would pay additional tax on retail supply and not on delivery to the auto assemblers, they said.
According to them, the SRO is not worded correctly and not in line with what was agreed with the auto parts dealers association. It is creating confusion in the organised OEMs auto chain.
They said that despite repeated requests the industry is still awaiting amendments to the said SRO wherein it was agreed that auto parts industry would be removed from Third Schedule of the Sales Tax Act 1990 to pay extra 2 per cent tax for sales of auto parts at retail stage only.
Pakistan Association of Auto Parts and Accessories Manufacturers (PAAPAM) Chairman Usman Aslam Malik said, “One of the cardinal principles of taxation is that it should be levied on the basis of ‘capacity to pay’ whereas auto industry is already heavily taxed resulting in increase in price of vehicles.”
He said small suppliers do not have the capacity to manage this cumbersome paper work related to deduction of tax on purchases from smaller suppliers.
Criticising amendment in the Third Schedule of Sales Tax Act, he said the change in law had created many hardships for the local manufacturers, rendering the industry totally uncompetitive against imported parts, which already command 90 per cent of the market due to under invoicing, non-declaration, smuggling and no sales tax on retail prices.
