The federal government’s plan to alter the basis for Withholding Tax (WHT) on domestically manufactured automobiles in the upcoming budget has raised concerns within the industry. The Pakistan Automotive Manufacturers Association (PAMA) has cautioned against the potential negative impact this move could have on the struggling auto sector.
PAMA Urges Government to Reconsider Proposed Changes
In a letter addressed to the Chairman of the Federal Board of Revenue (FBR), PAMA expressed its apprehensions regarding the potential consequences of shifting the basis for WHT calculations from engine capacity to invoice price. PAMA emphasized that this change would adversely affect the sales of locally-made vehicles.
Increased WHT Threatens to Inflate Retail Prices
PAMA urged the FBR to abandon the proposed alteration, asserting that it would lead to higher WHT amounts on domestically produced vehicles, inevitably causing an escalation in retail prices. Instead, the association called for a reduction in the current engine-based WHT on vehicles.
Impact of Import Restrictions and Macroeconomic Challenges
PAMA also highlighted the tumultuous journey of the auto industry, with a notable decline in 2019-20 and 2020-21 due to the COVID-19 pandemic. However, the sector had started to recover in 2021-22, only to experience a significant downturn in 2022-23 owing to import restrictions.
PAMA Members Suffering Heavy Losses
As a result of these restrictions, along with skyrocketing inflation and other macroeconomic issues prevalent in the country, PAMA revealed that numerous members of the association were incurring losses worth billions of rupees.
In conclusion, the proposed changes to the basis for calculating WHT on locally produced automobiles have raised concerns within the Pakistan Automotive Manufacturers Association. PAMA warns of the potential negative impact on vehicle sales and urges the government to reconsider the proposed alterations. The association also highlights the challenges faced by the industry, including import restrictions and the prevailing macroeconomic situation, leading to substantial financial losses for its members. It remains to be seen how the government will address these concerns and whether any modifications will be made to the proposed budget.