The federal government has decided to tackle the issue of ‘On Money’ on selling of cars by specific individuals. The decision was taken during a meeting of Economic Coordination Committee (ECC) on December 16.
However, the federal government approved the proposal by ECC this week.
In a press release, the ECC said that unnecessarily long delivery time by the manufacturers is a usual complaint. “Henceforth, the system is exploited leading to additional payment known as ‘On Money’ by the buyers,” the statement said.
In order to end this practice, the government has decided to impose additional Withholding Tax on the buyers, who sell the locally manufactured cars within 90 days of vehicle delivery.
The government will impose the taxes as follows:
Earlier, we reported that as the car sales have surged in Pakistan after the COVID-19 lockdown, the menace of ‘On Money’ culture dominates the market. The buyers with no patience are totally ready to pay extra cash to car dealers for instant delivery of vehicles.
Reasons Behind This Culture:
One of the major reasons behind triggering of the ‘On Money’ trend is the government-imposed curbs on used car imports. Meanwhile, the dealers of imported cars have hiked the prices, citing changes in the exchange rate. Henceforth, the buyers have no other choice except locally manufactured vehicles, despite repeated price hikes in the last two years.
Another aspect behind this negative trend is the growers, who had better earnings because of cash crops. They have flooded the car market with extra money. Meanwhile, the commodity traders also enjoyed good sales during the pandemic as prices of vegetables, fruits, milk products, sugar, and flour increased rapidly.
‘On Money’ for Different Cars:
In October, the ‘on money’ or ‘premium’ on Honda Civic 1.8-i-VTEC Oriel was Rs80,000-100,000. Meanwhile, Toyota Yaris had ‘On Money’ from Rs50,000 to Rs60,000. The Toyota Fortuner Diesel with a price of over Rs 9.1million had the ‘premium’ of Rs 800,000.
If you come to Corolla and Grande, which had a delivery time of 2-3 months, were immediately available with Rs200,000 ‘On Money’. The impatient buyers who cannot wait for 2 months for Suzuki Cultus delivery were ready to pay Rs50,000-60,000 ‘premium’ for the car to get it on the spot.
According to the analysts, both government and customers have to play a vital role in ending this culture. On the one hand, the government needs to implement proper legislation, while on the other hand, the buyers need to resist it. They should pay the actual price, book their vehicle, and take delivery on schedule.