The customs classification committee of the Federal Board of Revenue (FBR) has declared a 50 percent customs duty on the import of “Mild Hybrid Vehicles” and said vehicles without electric motors cannot be declared as hybrid vehicles for availing tax concessions.
The FBR’s classification committee issued a ruling and rejected the claim of an importer.
The Classification Committee declared that the vehicles with an electric power source, such as an integrated alternator/starter, that is used only for non-propulsion functions are not classified as HEVs. These power sources can be used for running stop-start systems and may have regenerative braking and charge management systems.
Such vehicles may be referred to as having “hybrid technology” or being a “micro-hybrid”, but do not have an electric motor for propulsion. Thus, vehicles having an electric motor for propulsion are to be classified as Hybrid vehicles.
The Classification Committee observed that as per the report and insignia, these vehicles have been manufactured and are equipped with features of Hybrid Technology to achieve a number of desirables like running stop-start systems and charge management systems, etcetera. However, on physical examination of functionality and attributes, these vehicles have been categorically reported to not have an electric motor for propulsion.
The Collectorate of Customs Appraisement, West, Karachi conveyed the Findings/Recommendations/Order dated December 12, 2022, of the Federal Tax Ombudsman (FTO), passed whereby it was directed to refer the matter of classification of imported vehicles of the complainant to the Classification Centre.
Brief facts as reported are that complainant imported a ‘Used Nisan Dayz Hybrid Car’, ‘Used Suzuki Wagon-R Hybrid Car’, and ‘Used Suzuki Hustler Hybrid Car’ and claimed the benefit of concessionary rates of duties and taxes under SRO 499(1)/2013 dated 12.06.2013 which was not allowed in the light of Circular dated 05.10.2018 issued by the Collectorate of Customs, Appraisement-West, Karachi, treating the vehicles as HEV like Mild Hybrid Vehicles.
The importers/complainants filed subject complaints which were disposed of by the FTO vide the aforementioned order for referring the matter before the Classification Centre.
On the other hand, representatives of the importers/complainants contended that the Circular dated 05.10.2018 has already been declared illegal/void by different fora.
He contended that the imported vehicles have hybrid technology and the same are entitled to benefit of concessionary rates of duties and taxes under SRO 499(1)/2013 dated 12.06.2013.
The representative also emphasized that SRO 499(1)/2013 dated 12.06.2013 do not differentiate amongst various types of vehicles and/or contains words such as Hybrid like, Mild Hybrid, or Micro Hybrid and only states ‘Hybrid Electric Vehicles (HEVs) falling under PCT Code 87.03’ and the same has been held by various legal fora, to which being facts, the Classification Committee find no disagreement.
The Classification Committee observed that the scope and mandate of Classification Committee under Chapter-II (Classification) of COO 12/2002 dated 15.06.2002, is limited to the extent of determination of classification of goods and do not have vested authority, powers and mandate to decide the applicability of and interpret any concessionary regime in respect of imported goods which fall under the jurisdiction and domain of the Clearance Collectorates, the Board and the judicial fora. As such, the Classification Committee proceeded to determine the classification of impugned vehicles, the committee added.
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