Govt. Massively Increases Regulatory Duties on Imported Cars

The Federal Board of Revenue (FBR) has hiked the regulatory duty (RD) and various other taxes on the import of non-essential or “luxury” items, which also includes Completely Built-Up (CBU) cars.

For the layman, CBU means a fully built car that is more expensive vs a complete knock-down (CKD) kit which has car parts that need to be assembled and is cheaper.

According to reports, the board has hiked regulatory duties by 85% on the import of vehicles with engine capacity larger than 1000cc. The previous rate was 15% while the new rate is 100%. This implies that the CBUs are set to witness a massive increase in prices.

The Federal Board of Revenue (FBR) issued a Statutory Regulatory Order (SRO) 1571(I)/2022 to notify the RD hike and discourage the import of luxury CBUs into Pakistan. The step is to prevent further inflation and depletion of foreign exchange reserves.

The board has also imposed 35% additional customs duty (ACD) on vehicles under the following PCT codes:

• 8703.2323 — Sport utility vehicles -SUVs 4×4
• 8703.2329  — Sedans and Hatchbacks)
• 8703.2490 — diesel-powered vehicles
• 8703.3223 — CKD or SKD kits for SUVs
• 8703.3225 — all-terrain vehicles (4×4)
• 8703.3229 — Commercial vehicles
• 8703.3390 — Other vehicles with internal combustion engines or electric motor
• 8703.9000 — Vehicle included the SRO.1517(I)/2022.

Last week, Federal Minister of Finance Miftah Ismail removed the import ban on luxury and non-essential items including Completely Built-Up (CBU) cars. However, he added that the government will impose heavy taxes to make it nearly impossible to import.

Miftah stated during the press conference that:

We will impose such heavy duties that these items cannot be imported [easily] or at least in their finished form. I don’t have enough dollars, so I will prioritise cotton, edible oil, and wheat. I do not prioritise Iphones or cars.

The government demands complete indigenization of cars while the industry demands a consistent policy that enables localization. The recent RD hike will force the companies to have minimum reliance on auto-sector imports.