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Second-tier manufacturers of CKD (completely knocked down) motorcycles will enjoy full waiver from payment of Supplementary Duty (SD) from now on, says an order of the revenue board.
With the duty benefit, local motorcycle manufacturers will be able to produce bikes instead of just assembling them.
The National Board of Revenue (NBR) has issued a Statutory Regulatory Order (SRO), dated March 18, 2019, by offering the exemption of 20 per cent SD.
The benefit will be applicable only to import of four-stroke CKD motorcycles having the cylinder capacity (cc) above 50cc but below 250cc.
The NBR defines the second-tier manufacturers as the producers who have capacities to locally produce one or more important parts of motorcycles, manufacture chassis after importing their parts or those who are collecting materials from the local market for assembling or production of complete motorcycles.
According to the SRO, motorcycle assembling companies which import CKD bikes with complete chassis and other parts will not get the duty benefit.
The NBR also tagged some conditions including mandatory VAT registration for any motorcycle manufacturer for availing the benefit.
According to the SRO, the second-tier manufacturers will be able to import four types of CKD motorcycles with four-stroke engines for the purpose of manufacturing complete bikes.
Officials said the duty benefit would encourage CKD motorcycle importers or assembling companies to enter the second tier of the industry.
Currently, duty and taxes totaling 91.88 per cent are applicable to import of CKD motorcycles by the second-tier manufacturers even after exemption of the 20 per cent SD.
The NBR extended the benefit in the wake of demand from various companies, the officials said.
The benefit was sought by the Japanese Honda in which the government owns a stake of 30 per cent as well as the Indian brands TVS and Bajaj.
The NBR has split the motorcycle manufacturers enjoying the duty waiver into two categories-first tier and second tier manufacturers.
The first-tier manufacturers are entitled to large-scale duty benefits.
Since 2016, the customs wing of the NBR has been offering different duty benefits on import of basic raw materials, spareparts and some other equipment for encouraging the local motorcycle manufacturing industries.
As per the NBR requirements, they must have to manufacture all parts of motorcycles using imported or locally-collected raw materials, or have to produce chassis or some important parts such as swing arm, wheel, fuel tank, handle bar and muffler (silencer) to be recognised as category-one manufacturers.
Officials said the NBR looked to encourage the assemblers to enter into the field of semi-manufacturing activities by offering the tax benefit.
On introduction of the duty waiver, now there is a 20 per cent difference of applicable duty rates between second-tier manufacturers and assemblers.
Value addition by the second-tier manufacturers was considered in offering the duty-benefit, they said.