Key Takeaways
- National Tariff Policy Board criticizes government decision.
- Additional duties spark debate over trade barriers.
- Industry leaders voice concerns over policy impact.
The government has imposed additional customs duties of up to 31 percent on imported motorcycle parts, a move that has sparked controversy among industry experts and policymakers.
Dr. Rubina Athar, a member of Pakistan’s National Tariff Policy Board, criticized the decision, stating that the proposal should have been presented to the board before being sent to the Economic Coordination Committee (ECC).
According to the Finance Ministry, the ECC has approved an additional 11 percent customs duty on imported vehicle tyres and motorcycle parts, with the duty rising to 31 percent on certain motorcycle components when manufacturers import them instead of producing them locally.
The affected motorcycle components include license plates, brackets, side reflectors, decorative parts, foot plates, wheel assemblies, windshields, seats, toolboxes, and center covers. Imports of these parts from China remain subject to zero duty under the Free Trade Agreement between the two countries.
The Federal Board of Revenue (FBR) stated that the proposal originated with the Ministry of Industries and Production’s Engineering Development Board. The Ministry of Commerce said the ECC had approved amendments to SRO 693(1)/2006, which covers additional customs duties on certain locally manufactured parts imported by original equipment manufacturers in kit form.
The Commerce Ministry noted that the relevant automotive sector notifications remained in effect even though the Auto Policy 2021 to 2026 expired in June. It added that the National Tariff Policy Board had previously determined that SRO 693 fell outside its remit because it was part of a separate policy framework.
Senior economist Vaqar Ahmed warned that favoring selected sectors in the application of tariff policy could undermine its objectives. Zafar Mehmood, CEO of Nimir Chemicals, argued that reducing customs duties alone would not necessarily lower costs, as other taxes and duties also burden businesses.
Shakil Shah, a member of the FBR, highlighted the issue of advance income tax collected at the import stage, which ties up businesses’ funds regardless of whether they ultimately make a profit. He called for the elimination of such withholding taxes at the import stage.
Rubatech CEO Zain ul Abideen expressed concern that the National Tariff Policy, combined with the new energy vehicle policy, could threaten the conventional automotive industry by favoring new energy vehicles. Athar, however, argued that industries needed pressure to overcome inefficiencies.
Wajid Bukhari, secretary general of the Pakistan Association of Large Steel Producers, stated that the tariff policy had not significantly affected the steel industry so far, citing lower interest rates and energy costs.
The proposal to impose additional duties should have been presented to the board before being sent to the Economic Coordination Committee (ECC).
Dr. Rubina Athar, Member of Pakistan’s National Tariff Policy Board
Favoring selected sectors in the application of tariff policy could undermine its objectives.
Vaqar Ahmed, Senior Economist
Importers could struggle to recover amounts withheld beyond their actual tax liability.
Shakil Shah, FBR Member Customs
