17% Sales Tax Waived Off for Buyers of Cars Auctioned by Govt

The buyers of old and used vehicles from the sale/auction of government departments /autonomous bodies would not be legally required to pay 17 percent sales tax where sales tax has already been paid at the time of local or import stage.

If any government department asks for payment of 17 percent sales tax on sale/auction of old and used cars, it would be illegal following issuance of a clarification by the FBR on the said issue, experts said.

Sources told Propakistani that the said clarification of the Federal Board of Revenue (FBR) will end controversy of collecting 17 percent sales tax from bidders from auction/sale of old and used cars by the government departments/autonomous bodies. At present, the government departments /autonomous bodies are forcing the purchasers of the old and used cars and other vehicles to pay 17 percent sales tax at the time of auction. This was due to different clarifications issued by the FBR in the past on the said issue.

The buyers were forced to deposit 17 percent sales tax on sale/auction of vehicles even in cases where sales tax has already been paid at the time of local or import stage.

Sources said that the issue of chargeability of sales tax on auction of vehicles has been examined keeping in view the clarifications issued by the Board from time to time.

The FBR stated that it is intimated that Board from time to time issued various clarifications vide letters dated August 2, 2006; November 21, 2013; January 7, 2020 and November 13, 2020, wherein, it has been conveyed that sales tax is not payable on old and used vehicles auctioned/sold by the government departments/ autonomous bodies, where tax was paid at the purchase/ import stage.

However, the said exemption is not applicable to the vehicles which were brought into the country or purchased by the auctioning department without payment of due sales tax, which is still in the field and binding on government departments /autonomous bodies, sources referred to the FBR.

However, the clarification vide letter dated November 20, 2020 has been issued in the broader context which implies that on auction of goods including vehicles sales tax is chargeable @17% in terms of section 2(33)( b) of the Sales Tax Act, 1990.

In this regard, Board has clarified that on auction of serviceable old and used vehicles if sales tax has been paid at the time of local or import stage, no sales tax is chargeable on auction of stated vehicles.

Whereas, on auction of unserviceable/condemned old and used vehicles, the same shall attract charge of 17 percent sales tax from the bidders, irrespective of the fact that sales tax has already been paid on such imported or locally purchased vehicles and tax so charged be deposited into the federal government treasury accordingly, sources quoted FBR clarification