Govt Announces Huge Tax Reduction for Small Vehicles in Budget 2021-22

The 2021-22 budget has been released, indicating several upcoming policy changes. Speculations are being made about the changes that are expected in the new auto policy, as it has often been reported that the local prices of the vehicles may finally reach stability.


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It has been revealed that the government has abolished Federal Excise Duty (FED) on locally assembled vehicles with an engine displacement of 850cc or less. The said Duty rate was 2.5% prior to the development.

In the session, Federal Finance Minister Shaukat Tareen further informed that sales tax on the said segment of cars has also been brought down from 17% to 12.5%, resulting in a 4.5% of reduction in tax rates.

Companies such as the Pak Suzuki Motor Company (PSMC), Regal Motors, and United Motors are the only companies that currently assemble and sell vehicles with an engine capacity of 850cc or less, which implies that their prices should now be reduced by approximately Rs. 150,000.

Reportedly, the Chairman of the All Pakistan Motor Dealers Association (APDMA), HM Shehzad, recently requested the government to make changes in the new auto policy that will be implemented after the introduction of the 2021-22 budget.


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In his letter to the government, Shehzad proposed that it should amend the restrictions on the commercial imports of old vehicles to Pakistan, and reduce the rate of the tariffs on the imports of these vehicles to create a more competitive atmosphere in the market.

The automakers are highly anticipating a better pricing strategy while the government seems to be making active efforts to strengthen the local auto industry. The aforementioned development also signals the advent of numerous new small cars in the Pakistani market.



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