It is quite likely that the government might consider introducing a new scheme for the import of used vehicles under certain Quantitative Restrictions (QR’s).
According to the sources, a meeting chaired by the Adviser to Prime Minister Dr. Abdul Hafeez Sheikh will be held today in which several issues related to the import of vehicles under personal baggage, transfer of residence and gift schemes for overseas Pakistanis will be discussed. The final decision regarding the introduction of a new regulatory framework will be made after the meeting. The import scheme under the above-mentioned conditions has been reported to be misused by the commercial importers. By using the passports of Overseas Pakistanis, used cars are imported by these importers, thus leading to an outflow of foreign exchange from the country. Surprisingly, only 5% of cars were imported by genuine Overseas Pakistanis under the allowed conditions. To curb this practice, the Commerce Division prescribed a clear transaction mechanism in the import policy.
According to this transaction mechanism, for all the new or used vehicles imported under the allowed conditions, the duties and taxes shall be paid out of foreign exchange arranged by either national of Pakistan or a local recipient who is supported by a bank encashment certificate which indicates the conversion of foreign remittance to local currency. It was also made compulsory that these remittances shall originate from the account of Pakistani national sending the vehicle from abroad and also be received in his account. In case his account doesn’t exist, it should be received in the account of his family. However, the Federal Board of Revenue (FBR) had reservations on this mechanism as the recipient account could also belong to the customs clearing agent or notified party in the Bill of Lading. The conflict between the Commerce Division and FBR regarding the import of vehicles might lead to an introduction of a new scheme or regulatory framework in which commercial importers will be allowed to import under certain Quantitative Restrictions (QR’s).
The Federal Board of Revenue (FBR) was of the view that the circle of import of vehicles under personal baggage, transfer of residence and gift scheme could be expanded by including the commercial importers for the benefit of the automobile industry. It believes that restricting the imports by commercial importers has implications on the competition in the local auto sector. The Finance Division has an opinion that that is a clear gap between the supply and demand in the automobile sector of Pakistan, which allows the local auto manufacturers to make abnormal profits. It stated that the policy proposed by the Commerce Division may be kept intact but to curb unfair market practices and fill the gap between the supply and demand, a new scheme may be introduced. In the new regulatory framework, commercial importers may be allowed to import vehicles by imposing certain Quantitative Restrictions (QR’s). It will also restrict the misuse of the current import policy.
On the other hand, the Commerce Division stands by its view that the scheme was purely aimed to facilitate the Overseas Pakistanis but unfortunately, it has been extensively misused by a majority of importers. The transactions were also not carried out through proper banking channels, eventually resulting in an illegal outflow of foreign exchange from the country and money laundering. However, in the meeting chaired by the Adviser to PM, a final decision will be taken regarding the possibility of introducing a new scheme. It is expected to resolve all the reservations and provide a transparent mechanism for the import of vehicles in the country. The illegal outflow of foreign exchange shall be strictly prohibited which dents the economy of the country. Let’s hope the government comes up with a strong new scheme that resolves all the issues of the automobile industry.
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