FBR Introduces 25% Sales Tax on Cars Over Rs4 Million, Impacting Local Auto Industry
The Federal Board of Revenue (FBR) has implemented a 25% sales tax on domestically manufactured or assembled cars exceeding an invoice price of Rs4 million, a move expected to further burden the “already struggling” auto sector, as per The News report on Saturday.
According to the notification issued by the FBR on Friday, the 25% sales tax will be applicable to locally manufactured or assembled vehicles with engine capacities of 1400cc and above.
During the tenure of the former caretaker government, the Economic Coordination Committee (ECC) and the federal cabinet had approved the imposition of a 25% general sales tax (GST) on all domestically manufactured vehicles priced at Rs4 million or higher, or with engine capacities exceeding 1400cc or double cabins.
Pakistan’s auto manufacturers have expressed disappointment over the decision, urging the government to reconsider the increased sales tax. They argue that this move will primarily impact domestic car manufacturers rather than importers of used vehicles.
The FBR estimates an annual collection of Rs4 to Rs4.5 billion through these new taxation measures.
The ECC previously approved an FBR summary imposing a 25% GST on all vehicles above 1400cc. However, an additional condition was later added specifying that vehicles priced over Rs4 million would also be subject to the 25% GST.
Prior to this change, vehicles with engine capacities above 1400cc were already paying a 25% GST. With the new amendment, vehicles priced above Rs4 million will now face a 25% GST instead of the previous 18%.
On the other hand, vehicles with engine capacities up to 850cc will continue to have a GST rate of 12.5%.
The government had introduced the enhanced GST rate of 25% on luxury vehicles in the previous budget for cars with engine capacities above 1400cc.
An FBR official mentioned that enhanced GST rates on luxury vehicles are common in various countries as a measure to control their consumption, with some nations implementing even higher rates.
