The Excise Taxation and Narcotics Control Department (ET&NCD) Punjab is considering removal of Luxury tax on all imported vehicles in the province.
The luxury tax aims at promoting local automobile industry by making imports expensive and discourages the increasing import of vehicles and the outflow of foreign exchange,
Not Registering in Punjab
It has been duly noted that buyers are avoiding paying this tax in Punjab and rather prefer going to Islamabad to have their cars registered. This is due to the difference in the tax on a provincial level thereby causing a negative effect on foreign exchange.
Government representatives stated,
Due to lesser registration rates and quarterly token tax payments, majority of the imported vehicle owners prefer ET&NCD Islamabad, instead of Punjab that takes yearly token tax payments.
A new tax on imported vehicles with an engine capacity of over 1,300 cc was implemented back in June 2016. According to this taxation policy, the buyers were liable to pay an amount of Rs. 70,000 for a vehicle over 1,300 cc, Rs. 150,000 for a vehicle over 1,500 cc, Rs. 200,000 for 2,000 cc and above, and Rs. 300,000 for a vehicle with an engine capacity of over 2,500 cc.
This tax is levied separately, adding to the list of customs duty, token tax, income tax, professional tax, registration fees, and withholding tax already charged from vehicle importers.
Officials have told that in meetings held in May 2017, a fine was considered for car owners who had registered their vehicles in provinces other than Punjab. The Motor Vehicle Ordinance Act of 1965 also states that a vehicle has to be reapplied to ET&NCD for registration if it stays in a province for more than 120 days.
No Crackdown on Tax Avoidance
Another suggestion discussed was a crackdown on vehicle owners who avoided this tax and to make them register again with the provincial excise department. However, this proposal was denied.
The excise and customs officials have also reported that the number of registrations in the province is bound to increase if this tax gets removed, hence adding revenue to the excise department.