Import of reconditioned cars has dropped 60 per cent year-on-year in fiscal 2019-20, something the industry's people are attributing to a tariff structure and declining sales in the domestic market.
During the year, 5,223 reconditioned cars were imported, resulting in Chattogram Customs House earning just Tk 223 crore in revenue.
In contrast, Tk 651 crore was generated in revenue from the import of 13,044 such vehicles in fiscal 2018-19.
The price difference between a reconditioned and a brand new car is very insignificant, according to Abdul Haque, president of the Bangladesh Reconditioned Vehicles Importers and Dealers Association (Barvida).
Customs is imposing a duty on brand new imported vehicles based on prices mentioned in the invoice but this method is not followed on reconditioned cars, he said. In case of reconditioned cars, the National Board of Revenue determines the duty based on yellow book prices, he said.
The yellow book price is the international yardstick for car prices issued by the Japan Auto Appraisal Institute, an agency of Japan's Ministry of Economy, Trade and Industry.
The prices paid by importers for reconditioned cars are less than what is mentioned in the yellow book, says Barvida.
For this reason, the duty imposed is Tk 2-3 lakh higher than what it would have been if the invoice had been the determining factor, said Haque.
"As a result, our sales have also come down due to higher prices of cars," he said.
Due to a nominal difference in import duty between brand new and reconditioned vehicles, the government is losing a large chunk of potential revenue from the sector, he said.
"Car prices are now out of reach for many buyers. If the government reduces duty on reconditioned vehicles, car imports will increase and the government will earn more revenue form the sector," Haque added.
Due to the high duty on the import of reconditioned vehicles, the selling price of cars are also becoming too high, said Monzurul Alam Chowdhury, former vice president of Barvida and managing director of Multination Company.
About 850 reconditioned vehicle importers had been involved in the sector but now most of them are leaving the business, he said.
Reconditioned vehicle traders have to pay import duties ranging from 31 per cent to 826 per cent depending on the engine capacity, apart from a 15 per cent VAT, 5 per cent advance tax, 5 per cent regulatory duty, and 4 per cent advance trade VAT on tariff value.