Govt’s revenue on auto part imports is square root of zilch

Govts Revenue on Auto Part

LAHORE: Almost every day many auto parts consignments are arriving from China, Thailand and other countries at different ports in Pakistan but the government’s revenue on these imports is still negligible due to misdeclaration of these parts during clearance at customs and loopholes in import policy.

According to sources, Pakistan loses approximately Rs. 10 billion every year in terms of import duties and taxes as many importers are involved in malpractice in connivance with incompetent and corrupt staff at customs are exploiting the loopholes in import policy to misdeclare the imported goods. Sources said that Custom Ruling 329 of import policy is a list in which duties on 70% parts are defined and 30% are mentioned as ‘others’ while the duty structure is based on weight rather than the value of these auto parts and is as low as US$ 2.48/kg on most parts even if their value is high, such as diggis (Car Trunks).

Sources said that the importers very intelligently cheat the authorities by misdeclaring few parts in other categories, saving applicable duties. For example, they said that shock absorbers are being made locally and should be imported under ITP 8010 category if needed, paying 50% punitive duty on it but some importers are importing it under ITP 8090 paying 15% less duty.“It seems that either the relevant staff is not aware about the rules and clearing such parts under wrong category or is involved in some form of corruption,” sources claimed. Sources said that it is very easy to mis declare / under invoice as most of the clearing agents plays smartly and take benefit of current custom laws very easily.

For instance, they said that an importer declared car luggage (DIGGI) as 2 kg only instead of 20 kg, and the declared value of that car luggage was only US$ 4.96 which almost equals to Rs 450 only. “Realistically Rs 450 is not even the cost of packaging (board box) or wooden cages which is mandatory to pack any kind of parts and it shows that to clear in KGs without any discrimination of make, model and cc is done with closed eyes by custom concerns,” the sources added. On top of it if genuine parts are being imported, it is also very easy to evade duties by removing genuine logos from packaging and declaring those as replacement parts which have lesser duty and no one from custom really checks that what kind of parts are being cleared.

“The solution is to consider OEM FOB value and take reference values from there to ensure that whatever parts are being imported into Pakistan should not be mis declared,” sources suggested.Sources said that this is the right time that Ruling 329 is reconsidered by custom valuation to review declared value of auto parts and take all stakeholders on board (traders, OEMs, local manufacturers) to eliminate loopholes in the policy.

“Almost all types of auto spare parts ranging from critical engine and transmission parts such as rings, pistons, gas kits, maintenance parts like oil filter, air filter are being imported through sea in astonishing quantities and misdeclaration is causing losses of billions of rupees to government and the government should put a strict check on such practices,” sources added.This would not only help the government to increase the revenue generation but would also enable legal businesses to expand, generating more revenues and employment opportunities for the countrymen. – PT