FTO Proposes Measures to Control ‘Own Money’ on Cars

In the upcoming year, the Federal Tax Ombudsman (FTO) has proposed measures to the Federal Board of Revenue (FBR) to manage the phenomena of “own money” in the vehicle sector (2022-23).

Dealers have started charging their own money for various makes and models of locally manufactured autos. The FBR has received a budget request for the next fiscal year from the FTO office.

According to the FTO, automakers book new cars through their dealers against partial payments and do not initially accept full amount pay orders/drafts. They engage in this technique to take advantage of time and price increases.

The FTO has recommended instructing dealers to accept full payment pay orders at the time of booking to save consumers from price increases and reduce their money on automobiles.

In a recent order issued by the FTO, Dr. Asif Mahmood Jah, the Federal Tax Ombudsman (FTO), asked the Federal Board of Revenue (FBR) to ensure payment of Kibor plus 3 percent per annum to buyers of automobiles for delayed car deliveries of more than 60 days.

According to the FTO’s instructions to the FBR, some taxpayers filed complaints with the FTO, claiming that they had incurred a great deal of mental and financial hardship due to the additional financial burden caused by the delayed delivery.

In light of SRO 837 (1)/2021, Dr. Jah has directed the FBR not only to ensure compliance with clause (ii)(xiv) but also to forward detailed statements being submitted biannually to the Engineering Development Board (EDB) or Input/Output Co-Efficient Organisation (IOCO) reflecting details of compensation being paid to customers who receive delivery beyond 60 days.

The FTO office noted that there had been repeated complaints of delayed deliveries by importers–cum-assemblers and non-compliance with the terms of the SRO that provide for payment of Kibor plus 3 percent to customers in the event of delayed delivery.

According to a research study conducted by the Pakistan Institute of Development Economics (PIDE) last year, automobile users paid Rs. 150 to 170 billion in illegal transactions as “own money” in the previous five years.

Own money is a premium imposed by dealers in addition to the vehicle price in exchange for the fast delivery of cars owing to market constraints.

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