Auto part makers: Exemption sought from extra sales tax

“In spite of an agreement, in principle, with the FBR and finance ministry, the long delay in reversal of 2% extra sales tax on non-retail sales of auto parts has led to uncertainty and loss of sales in the industry,” said Paapam Chairman. DESIGN: ESSA MALIK

LAHORE: 

The Pakistan Association of Auto Parts and Accessories Manufacturers (Paapam) has asked the finance minister and Federal Board of Revenue (FBR) chairman to resolve the issue of 2% extra sales tax, which is being discussed with the government for the past four months.

“In spite of an agreement, in principle, with the FBR and finance ministry, the long delay in reversal of 2% extra sales tax on non-retail sales of auto parts has led to uncertainty and loss of sales in the industry,” said Paapam Chairman Usman Malik in a statement on Tuesday. Members of the association were continuing to receive notices from the tax collectors for immediate payment of the tax, he said.

According to Paapam, 15 new items were added to the 3rd Schedule of the Sales Tax Act through Finance Act 2013 for imposing tax on retail prices of these items. However, in view of the hardships faced by registered persons, the FBR removed 11 items from the schedule and levied 2% extra sales tax on these in October 2013.

However, the association insists that this additional tax could not be adjusted as input tax would add to the production cost of the industry.

Malik said the rationale was that majority of wholesalers, distributors, dealers and retailers in the downstream supply chain were not paying sales tax on value addition. However, in the case of auto parts and vehicle manufacturers, the supply chain was fully documented and supplies made to automobile manufacturers could not be termed “retail sales”