Govt plans duty privileges for car importers

The National Board of Revenue, in a rare move, plans to give retrospective duty benefits to a section of reconditioned car importers in a bid to help them take delivery of the 3,700 imported vehicles stuck at ports for years.
The tax privileges known as depreciation benefits—now 45 percent—are meant for the current fiscal year. The NBR will now give the same benefits to the vehicles imported in the last three fiscal years, which will cost the state coffers roughly Tk 100 crore.
The depreciation benefit to assess the duty of five-year-old cars increased to 45 percent this fiscal year from a flat rate of 35 percent the previous year.
For the special benefits, the NBR has an explanation: it says it will provide the benefits for the sake of public interest.
But insiders said the issue is commercial in nature and the privilege will come as a huge loss to the state.
The NBR will send the proposal to the finance minister for approval.
The move will reduce the duty burden on those importers who are yet to take delivery of their vehicles from ports.
For example, a 45 percent depreciation benefit would reduce duty burden by nearly Tk 3 lakh for a 1,500-cc Toyota Corolla Axio model of 2006, 2007 and 2008.
However, the benefit will not be applicable to the importers who had cleared their cars by paying duty based on 35 percent depreciation before June 6.
The NBR move comes amid lobbying by importers of older cars after they found the relaxed depreciation rules would not be applicable to determine the duty of the vehicles that were imported since fiscal 2009-10 and remained stuck at ports.
"We have been demanding a year-wise depreciation benefit for the last three years. And we were told that the year-wise depreciation benefit would be applicable to the five-year-old cars that are staying at ports," said Abdul Haque, managing director of Haq's Bay.
"But our issues remained unaddressed," said Haque, who has more than 1,000 reconditioned cars stuck at ports.
Haque said importers of relatively older cars faced uneven competition with newer cars due to the 35 percent flat rate.
Only 2 percent of importers had taken their older vehicles cleared by paying duties based on the 35 percent depreciation rate, he said.
"We are not demanding the extension of the depreciation benefit to make profit. It will help reduce our losses," Haque said.
Md Farid Uddin, NBR member (customs policy), said the government's import and customs policies were inconsistent.
The import policy of 2009-12 allowed import of five-year-old vehicles, but a 35 percent depreciation benefit was applicable to three-year-old cars in the customs policy.
Farid said importers have been demanding rationalisation of the depreciation benefit for the last few years. And the NBR was supposed to do that in the February-March period through a notification.
“The question of losing taxes would not arise at all if we had taken the decision at that time,” he said, adding that the importers may face losses even after getting the year-wise depreciation through a retrospective effect.
Because of the burden of paying higher duty based on the previous depreciation benefit, importers may not be interested in clearing their vehicles from ports, he said.
"It will be tough to sell so many cars at auction. We may also get less revenue than the amount we will get by extending the present year-wise depreciation benefit," Farid said.