ISLAMABAD: The government is planning a considerable cut in customs duty on import of up to three-year-old automobiles of all capacities and to withdraw a number of tax exemptions being enjoyed by various groups through discriminatory statutory regulatory orders (SROs) in the next budget.
According to reports, the government has in fact decided in principle to reduce duty on vehicles of different engine capacities to be imported under various schemes.
A look in the duty slab reveals that there is 150 percent customs duty on import of bigger vehicles which appears unnatural and necessitates the need for a duty reduction across-the-board. But obviously the cut will be significantly bigger on big vehicles and smaller on small ones.
Experts were of the view that by allowing bigger duty reduction on luxury vehicles the government did not want to favour the rich but it was because that the space for reducing 150pc duty was greater than cutting it from 45pc to 40pc on small cars. Vehicles having a capacity of over 2000cc are liable to 150pc duty.
It is expected that the duty reduction will be across-the-board, for 800cc, 1300cc, 1800cc and even 3000cc and above but with varying percentage while the age of vehicles would remain unchanged at up to three years.
It is to be noted that duty reduction was on the agenda of a meeting of the Economic Coordination Committee of the cabinet last week, but it could not be taken up. The ECC is expected to approve it in its next meeting.
Officials said the government was trying to create a new classification of vehicles below 800cc capacity like 600cc and 700cc to encourage import of smaller cars like Indian Nano car.
The focus would be on boosting revenue by increasing the number of vehicles rather than too much tax on fewer vehicles, they said.
They said a special arrangement would also be made for duty rates with a marginal increase in engine capacity. For example, if duty on up to 1800cc vehicle is 90 per cent, it would not drastically increase to 120 per cent if engine capacity increased to 1801 or 1820cc.
On the other hand, detailed consultations are underway including with the International Monetary Fund to do away with SROs. According to official estimates, about Rs480 billion revenue is lost every year due to a number of duty and tax exemptions through a series of SROs. The government has also hinted at eliminating all exemptions in about three years.
