The Ministry of Industries and Production (Mo&IP) has proposed the Federal Cabinet not to allow applicability of Federal Excise Duty (FED) on cars booked before the passage of Supplementary Finance Bill 2022.

In a summary for the Cabinet, the MoI&P has explained that in response to the decisions taken at a meeting held on January 10, 2022 under the chairmanship of the Federal Minister for Finance & Revenue and attended by Advisor to Prime Minister on Commerce, Federal Minister for Energy and Federal Minister for Industries and Production to review duties and taxes imposed on auto sector through Finance (Supplementary) Bill, 2022, the MoI&P forwarded O.M of even number of January 11, 2022 in this regard to FBR proposing effective date of payment of FED on new bookings.

However, the following condition of O.M has still not been implemented: (i) enhanced rates of FED on locally manufactured cars in Finance bill to become applicable on bookings made after passage of Finance Act and not to already booked cars.”

The MoI&P is of the view non-implementation of the condition is expected to disturb the market, adding that levy of FED on already booked vehicles in the cases where full/partial payment has been made by the customers on agreed price, demanding difference in amount from customers by the dealerships is expected to create chaotic situation leading to complaints on PM portal, Wafaqi Mohtasib Secretariat and various other legal forums.

The MoI&P has proposed that in order to pre-empt any embarrassing situation, the FBR may be instructed to implement the already agreed condition in accordance with the provisions of the Federal Excise Act, 2005.

For instance, FED on vehicles up to 1000 cc payable on booked vehicles before January 15, 2022 was zero percent but now is payable on booked vehicles after January 15, 2022. FED on vehicles with engine capacity from 1001 cc to 1300cc is still at 2.5 percent ad val. However, it has been increased by 100 per cent to 5 per cent ad val from 2.5 per ad val on 1301 cc to 2000 on vehicles booked after January 15, 2022. The FED on vehicle engine capacity ranging from 2001 and above, which was 5 per cent ad val on booked vehicles before January 15, 2022 has been increased to 10 per cent ad val on booked vehicles after January 15, 2022.

The federal government is empowered under sub section (4) of section 3 of Federal Excise Act 2005 to issue notification to that effect “”4) Without prejudice to other provisions of this Act, the federal government may levy and collect duty on any class or classes of goods or services by notification in the official Gazette at such higher or lower rate or rates as may be specified in such notification.”

The story was originally published in Business Recorder on January 26, 2022.