Dar exchanged views with FBR on proposals regarding budget 2015-16 and stated that full capacity of local tyre manufacturers should be utilised before free imports can be allowed. PAAPAM representatives attributed the auto parts industry's healthy growth to the government's conducive policies, and particularly appreciated the Finance Minister's role in taking prompt action in withdrawing 2% extra sales tax on non-retail sale of auto parts in March last year.
On the issue of levy of an RD on steel raw materials for auto parts sector, former Chairman PAAPAM, Munir Bana, explained to the Finance Minister and Chairman FBR that the levy of RD to protect Pakistan Steel Mills (PSM) is welcome. However, since PCT codes of raw materials manufactured by PSM are common for "auto grade" material (not manufactured by PSM), the auto parts industry has been inadvertently burdened by the levy of a regulatory duty on their imports of raw materials. As a result, FBR's own principle of "cascading structure of duties" has also been inadvertently violated by the levy of RD on auto raw materials, which are not manufactured locally.
Minister was also briefed by PAAPAM representatives that, based on FBR's own data, an RD of Rs 1 billion had been collected so far, out of which APMs' share was a mere Rs 70 million (which is less than 1% of total RD collection). Therefore, PAAPAM argued that, on the one hand, the government revenue of Rs 70 million was not significant, but on the other hand, the effect of this levy will snuff out the industry, as it will be rendered uncompetitive against imported parts, due to a drastic reduction in tariff differential in violation of the cascading principle.
FBR sources confirm that PAAPAM has suggested to FBR officials that since PCTs are common for locally manufactured and imported steel items (and it will be difficult to segregate them for levy of RD), it will be more feasible to exempt only those items that are imported under 'auto parts related' SRO 655. This will be simpler to implement, as only an additional clause (j) will need to be added to the "exemption list" of clause 2 of SRO 568, to the effect that "imports under SRO 655" will be exempted from this levy.