KARACHI: The local auto assemblers have voiced concern over a government’s proposal to charge withholding tax (WHT) on an invoice price basis instead of engine capacity saying it will push up vehicle prices and further dampen already reeling sales.

Currently, a fixed WHT is being applied on the engine capacity basis of an automobile under section 231B of the Income Tax Ordinance whereby the amount of tax to be levied is known to each filer and non-filer buyer of a vehicle.

WHT on vehicles up to 850cc to 3,000cc and above ranges between Rs10,000 to Rs500,000 for the “filers” while it hovers between Rs30,000 to Rs1.5 million for “non-filers.”

In a letter to the Federal Board of Revenue (FBR) on Friday, Pakistan Automotive Manufacturers Associ­ation (PAMA) Director General Abdul Waheed Khan said this move would substantially increase the WHT amount and inevitably make the vehicle costlier besides denting the overall automobile sales.

Indus Motor, Engro Fertiliser announce plant shutdowns

He asked the tax authorities to further reduce the existing WHT structure without changing the rates to bring down prices and boost auto sales.

He said after suffering almost zero sales in Covid years the auto industry revived in 2020-21 but sales again nosedived in the current fiscal year due to import restrictions. “The industry is now facing the worst time and many assemblers have suffered huge losses due to skyrocketing inflation and other macroeconomic maladies,” he added.

Mr Waheed said any further rise in the amount of tax shall badly impact the industry which is already paying 40pc plus per vehicle tax.

Plant shutdowns

Meanwhile, Indus Motor Company (IMC) has announced a complete production shutdown from June 3-8 due to insufficient inventory levels of parts to maintain production.

IMC in a stock filing on Friday said its vendors continue to face hurdles in import of raw materials and receiving clearance of their consignments, on account of challenges in the opening of letters of credit and supply issues by certain foreign vendors.

“This situation has disrupted the supply chain of the company while the vendors are unable to supply raw materials and components to the company,” it added.

Separately, Engro Fertilisers has announced a suspension of production at its plant situated at Port Qasim from June 5-30 to more efficiently manage its inventory and production. Notwithstanding the temporary closure, the company intends to meet the projected demand for the products manufactured at the plant.

According to Arif Habib Ltd (AHL), the country’s overall urea offtake in May improved by 10pc to 459,000 tonnes from May 2022 of 418,000 tonnes while 5MFY23 sales posted a one per cent drop to 2.490m tonnes from 2.510m tonnes in the same period last fiscal.

Published in Dawn, June 3rd, 2023