The Federal Board of Revenue (FBR) has informed the Engineering Development Board (EDB) and Ministry of Industries and Production that the FBR has to work out the possible revenue loss on account of any amendment in S.R.O. 655 (I)/2006 for extending duties and taxes exemption to tractors and motorcycles industries.
S.R.O. 655 (I)/2006 of the FBR is related to the exemption of raw materials, sub-components, components, and sub-assemblies imported to manufacture the components and assemblies of the vehicles.
During the 34th meeting of the Auto Industry Development Committee (AIDC) held at the Board of Investment, FBR’s officials informed the EDB that the auto industry’s exemption, S.R.O. 655 (I)/2006, could only be amended after calculation of the estimated revenue loss due to further duties and taxes exemption to other sectors like motorcycles, etc.
General Manager (Tariff) Engineering Development Board (EDB) highlighted that Orient Automotive Pvt Ltd requested the issuance of a Manufacturing Certificate for their indigenous models. CEO Dartways said in the case of the Motorcycle industry, no foreign Principal was asked. Only part catalog and appropriate manufacturing facilities were required. He endorsed that the firm should be allowed, and performance may be determined by the market.
General Manager (Tariff) said that SRO states roadworthy vehicles. However, it was highlighted that this is an off-road vehicle. CEO Dartways said that the basic condition of SRO is minimum facilities. CEO EDB said standards and safety is the concern of EDB. The representative of Millat Motors Pvt Ltd said that they would appreciate it if new companies and new designs/technologies are introduced in the market. However, they have serious reservations regarding the theft of their designs, which are registered in IPO.
Anis Siddiqui, Senior GM of Orient Automotive, said that they have facilities as per SRO. They are already in production, and their facilities are approved. They have added facilities and a research and development section as well. He clarified that their design is accredited by AMR Multan. He notified that their design is registered. Furthermore, ten test units are being tested for the last year without any problem.
Millat Tractor was advised that if their design is being copied, IPO is responsible to protect them, and courts are there to resolve any such disputes. General Manager (Tariff) added that EDB only verifies the facilities, not the product. PAMA endorsed the reverse engineering and development of local vehicles and brands.
General Manager (Tariff) explained that SRO 655 is only for the automotive sector. However, there is a proposal that it may be extended to other sectors to allow raw materials to be imported at zero-percent. Millat Tractors and Motorcycle supported this idea as they are getting many parts from 2nd tier vendors.
Chief (Tariff and Trade), FBR questioned that is it an isolated case. FBR has to look at a revenue loss. Why industries want IORC as an independent solution? Chairman PAAPAM explained that it is an issue of Ease of Doing Business; instead, the vendors imports and get sheets cut to size from MIDP, MIDP should directly import and out-size as per our requirements. IORC for a small vendor is very complex, therefore, they avoid applying for it.
Joint Secretary, MoC did not agree to the proposal and said SRO 655 is a tried and tested mechanism. Any change should be traceable and needed to a study in depth. Chairman PAAPAM said that there is no change in the law required. It is for everybody. Chairman EDB said that EDB would work on it to find a win-win solution for FBR and vendors.
It was decided to issue Orient Automotive Pvt Ltd manufacturing a certificate if they fulfill the criteria of SRO, i.e., Minimum in-house facilities.
It was also decided that EDB will work on IORC to the extent of sub-component under SRO 655111/2006 for supply to 2. Tier Vendor and if agreed, it will be placed for amendment in SRO 655 through Federal Budget.