Report: FBR to investigate MG Motors ‘Under-Invoice Scam’ – Javed Afridi Responds

Media reports suggest that SAIC might be selling these units to JW-SEZ at a low price. 

What is the MG Motor under invoicing scam?

Recent media reports state that the Federal Board of Revenue (FBR) has started a probe against a new car company, Morris Garage (MG) Pakistan. According to details, the FBR has launched an investigation over the ‘mega under-invoicing scam’. 

What is the mega under-invoicing scam?

The declared value of the MG HS customs is $ 11,632 per unit. This is the price at which MG doesn’t even sell vehicles in China or other more significant established markets. MG sells the same car at $27,000 globally. 

Media reports suggest that SAIC might be selling these units to JW-SEZ at a low price. 

Speaking about the matter, experts said:

This price looks very attractive but, at the same time, raises questions because it seems like it is “Under-Invoiced”. If any under-invoicing is happening, it’s a typical case of Trade-Based Money Laundering.  

Sources state that the scam is inflicting billions of rupees of financial loss to the national exchequer. According to reports, the “proof” for under-invoicing has also been shared with the concerned authorities and government ministers for a proper investigation.

MG defends itself against the MG Motor under invoicing scam.

JW-SEZ defends MG’s stance

The auto company MG started importing vehicles into the country in September 2020 and imported over 400 cars. Meanwhile, JW-SEZ, the local partner of MG/SAIC in Pakistan, said:

The company is actually paying the full 123.77% incidence of duty [instead of 50% subsidy] on each unit they are importing. The 123.77% incidence of duty is the correct duty for a vehicle, as per FBR custom tariff, if paid in full. 

Explaining further, JW-SEZ said:

So, as they are paying full duty, any number of the units can be imported, which is undoubtedly correct and has no issues whatsoever. 

PAMA expresses concerns

Recently, the Pakistan Automotive Manufacturer Association (PAMA) stated that the federal government favors one specific car manufacturer, who reportedly is a fresh entrant. They expressed this concern during the 34th meeting of the Auto Industry Development Committee (AIDC). 

Details about the MG Motor under invoicing scam.

Auto Policy details

The auto policy’s main aim was to bring investment in the country, increase competition in the country, eventually help consumers, create a lot of jobs locally, and help the associated industries grow. 

It should be noted that JW-SEZ applied for Greenfield Status under this policy a month ago. However, the auto policy is less than five months away from expiration. 

Reports state that according to the policy, a vehicle must be assembled in Pakistan before the expiration date. Sources say that JW-SEZ is doing nothing in the vehicle assembling regard and plant setup but plans to keep importing CBU’s.

 

MG and Issue of Bill of Lading (BOL): 

The real question here is that even if MG is importing cars on full duty, what’s the problem? 

The problem is that many MG HS owners in Pakistan have reported an issue with vehicle registration. As these are imported vehicles, a BOL/ Bill of Lading/Good declaration is a must at registration time. Many people reported: 

We are not being provided the document. Therefore, we cannot register MG’s vehicles with the excise department. 

Reports state that even after repeated requests to the MG officials in Lahore and Faisalabad by customers for over a month, the BOL is still not being given. Instead, the company is handing over goods declaration forms on which the declared value and the taxes paid on the declared value are struck out with a black marker. Regardless, many of the individuals are accepting the document.

However, the Excise department in Lahore and Islamabad has declined to register the vehicle on the basis that the document is not correct because the required information is not visible in the form. Following are the pictures of some of the documents/goods declaration paperwork people have received:

Authorities approach MG

Media reports claim:

MG officials were approached, and again the documents were not provided. Instead, “someone” from MG called the excise department and told them to register the vehicles without asking for the required BOL. Several cars got registered after a “phone call”.

Experts believe that this procedure is overriding a required document and somewhat bypassing the system. They said:

There is irregularity within the system, and it seems someone is playing around.

Response by MG Pakistan

MG Pakistan head Javed Afridi responded to these media reports in a tweet and said:

As new entrants bring in exciting new models at far lower prices, instead of competition, we expect maligning campaigns and baseless rumors.

He continued to state:

MG knows that competition is an unfamiliar phenomenon in Pakistan’s automobile industry. We invite everyone to join in a fair competition to serve Pakistani consumers with a bigger and better variety of vehicles at lower prices. 

Afridi also said:

For decades, Pakistani automobile consumers have been exploited by “cartels” that cornered them with low quality, boring models at exorbitant prices.

Conclusion: 

Experts believe that the issue of The BOL can cause severe problems for MG Pakistan. MG needs to reply to these reports with pertinent facts so that rumors and confusion can be put to bed.

What are your thoughts on this? Please share with us in the comment section below.

  • actually this is the case of underinvoicing because the export price of HS in china is 27000 us$ and if the car is exporting to different countries at 27000 us$ so why in pakistan this 11632 dollar

    secondly and if we assume that the invoice value is 11632 dollar which the custom data shows then why the selling price of car is 55 lacs which is too high

    so it is very clear that the importer of the car mention 11632 dollar instead of 27000 dollar in customs and evade the duty amd taxes of approx 15000 dollar

    and this 15000 dollar paid to mg China by Hundi or some other way of fund transfer

    the main thing is
    duty chori karli 15000 dollar ki

    aai samajh mai baat k nahi???
    jab pehli GD daali thi MG ki us waqt custom so raha tha kia k 400 CBU aany k baad hosh mai aaya hai FBR

    Pakistan zindabaad

  • Dear Javed Afridi Sahib,

    Looking for dealership in Gujranwwla Pakistan
    I have one acre piece of land used to be Eagle CNG on GT Road, cross the road is Honda dealership and Kia dealership. Next to my plot about 400 feet Toyota dealership us approved and ready to go. I am in between in the heart of auto dealerships.

    Our land Value is about 60 Correr and up. It’s going to be wonderful location for MG CAR Dealership.
    We have Good financial strength to have MG Dealership. You can have someone to appraise the land.
    Hopefully it will be approved by first look.Please call us or email me.

    Regards

    Shahid Mehmood
    106 Y-Block
    18-Street DHA Lahore or/
    ——————————————-
    164 Plainview Rd
    Woodbury New York 11797
    USA
    Cell# +1(917)439-5240
    Email. [email protected]


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