The withdrawal of zero-rated exemption from commercial vehicles (trucks, diesel and CNG buses) is bound to make vehicles costlier. An official in Hinopak Motor Company (HML) said the prices of truck chassis and complete bus hover between Rs1.6 million to Rs8 million and these vehicles will become costlier by Rs300,000 to Rs1.3 million due to imposition of 16 percent general sales tax.
In only one category the government was charging 17 percent sales tax and 2.5 percent federal excise duty on buses of less than 40 persons' seating capacity. From July 1, 2011, the rate of GST will be 16 percent but there will be no FED on this segment, thus bringing some relief in prices.
In the last one year the overall price increase in commercial vehicles segment was 10-14 percent due to rupee yen parity, hike in steel prices, rising material cost and high general inflation that resulted in higher cost of production. HML deputy general manager sales and business development Shahab Anwar, in a statement, said the imposition of GST on commercial vehicles would badly hit commercial automobile industry, which is already in declining phase.
The zero-rating facility extended to the commercial automobile sector in 2006 was of strategic importance for modernization of trucking industry to cope with the transportation needs of the country. He said this policy in the past had witnessed a drastic change in the transportation trends as new and heavy prime movers were now seen on the Pakistani roads. This also helped to reduce the adverse overloading phenomenon.
The new tax measures will directly hit the automobile industry and unemployment will rise in the principals as well as the vendors' areas. The decision will also have a direct inflationary effect as high transportation cost would result in general price hike and consumers will be affected. The commuters will also suffer with high fares of buses. He said it looked strange that the government was trying to meet its revenue target from the heavy vehicle industry, whose yearly sales hover between 4,000-5,000 units. Shahab said prior to the new budget the government also allowed import of second-hand vehicles which was already impacting commercial vehicles industry operating at 50 percent capacity. It will have a negative impact on overall industry as new investment may not be encouraged.
There has been a difference of opinion among the experts regarding impact of the nine newly included items into the General Sales Tax (GST) net on the life of a common man. Former Federal Minister for Finance Dr Hafeez A Pasha said that the newly included nine items into the GST net would not affect the common man while Dr Pervez Tahir, former Chief Economist of Planning Commission of Pakistan, said these things would certainly affect the common man.
The government in this budget has imposed tax on CNG kits, CNG buses, agricultural machinery, aircraft and its spare parts, ships, ambulance equipments, ultrasound gel, surgical tapes and computer software. The government on the other side has reduced GST rate from 17% to 16% and introduced three new rates in the GST i.e. 0%, 5% and 16%.
Dr Hafeez A Pasha said that government has to generate its revenue. Reduction in the GST rate would have good affect for the poor people. Regarding GST on CNG kits and buses, Pasha said that the consumption of CNG must be discouraged.
Dr Pervez Tahir responded quite contrary to the opinion of Dr Pasha. He said the implementation of GST on the above said products would certainly affect the common man.
-Published on page#-18 in June-2011 issue of MOBILE WORLD Magazine.
www.mobileworld.com.pk
