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FED withdrawal from locally produced vehicles raises eyebrows

KARACHI: In a surprise move the government has offered relief to the rich by reducing the 10 percent federal excise duty (FED) on Toyota Fortuner, a sports utility vehicle (SUV) being rolled out by Indus Motor Company (IMC).

The government accepted a request by Pakistan Automotive Manufacturers Association (PAMA) seeking withdrawal of the FED on locally produced 1,800cc and above vehicles.

Fortuner has so far not met expectations of IMC due to its high prices and a tiny number of buyers. It was launched at a price of Rs5.2 million in February last year and since then its price has jumped to Rs5.742 million despite an 11 per cent appreciation in the rupee’s value against the dollar from December till last month.

According to PAMA figures, in 2012-2013 production and sales of Fortuner stood at 847 and 812 units, while in July-April 2013-2014, production and sales registered only 352 and 358 units respectively.

The association, in its pre-budget proposal for 2014-2015, said the FED levy had put the country’s first SUV manufacturing project in danger due to its falling sales.

However, with the removal of FED, the price is likely to come down by 10 per cent. Importers of used cars were stunned over the decision to favour only one locally produced vehicle.

H.M. Shahzad, Chairman of the All Pakistan Motor Dealers Association (APMDA), said the government’s attitude vis-a-vis used car import was disappointing. He said an invitation by the government last month had raised his hopes that some “relief for importers of used cars is coming up”.

But the expectation turned out to be short-lived, he regretted.

It was most surprising that a 10 per cent duty on vehicles of 1800cc and above imposed on both locally assembled and imported vehicles had been withdrawn in the former instance.

He called upon the finance minister to withdraw the levy on imported vehicles as well.

“It seems all our efforts and expectations have gone down the drain and a step-motherly treatment has been meted out to this business,” Shahzad said.

“How many Fortuners the IMC will be able to sell and what kind of a revolution it will bring in revenue collection, employment generation and indigenisation,’’ he wondered.



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