The federal government presented the Finance (Supplementary) Bill 2021 in parliament for approval on Thursday. The bill has proposed to withdraw a wide range of exemptions to generate additional revenue of Rs. 343 billion.
Where the auto sector is concerned, the bill has increased the sales tax on all combustible-engine cars, hybrid, and electric vehicles, imposed higher federal excise duty (FED) on both locally produced and imported cars, and announced an increase in the advance tax on registration of new cars.
The government had recently approved the Automotive Industry Development and Export Policy (AIDEP) 2021-26 which called for a series of tax exemptions for automakers to reduce the car prices in Pakistan. Once the Finance (Supplementary) Bill 2021 receives parliamentary approval, the car prices will go up significantly instead of coming down.
Here is a detailed breakdown of the proposed taxes on the auto industry.
Sales Tax
The sales tax has gone up across the board with Hybrid and imported Electric vehicles witnessing the largest increase despite the government’s announcements regarding the promotion of climate-friendly cars. All cars, except small cars, do not get any sales tax exemptions under the proposed Finance bill.
| Category | Capacity | Previous Tax | Proposed Tax | Increase |
| Combustible engine | 850cc or above | 12.7% | 17% | 4.5% |
| Hybrid | Up to 1800cc | 8.5% | 12.5% | 4% |
| Imported Electric | – | 5% | 17% | 12% |
FED
The government is also increasing the Federal Excise Duty on all combustion-engine vehicles. The same FED was previously reduced for small to medium cars but the government has now decided to increase it even more.
Imported Cars
| Capacity | Previous Tax | Proposed Tax | Increase |
| 1001cc-1799cc | 5% | 10% | +5% |
| 1800cc-3000cc | 25% | 30% | +5% |
| 3001cc-above | 30% | 40% | +10% |
Locally Assembled Cars
| Capacity | Previous Tax | Proposed Tax | Increase |
| 1001cc-2000cc | 2.5% | 5% | +2.5% |
| 2001cc-above | 5% | 10% | +5% |
| 3001cc-above | 30% | 40% | +10% |
Double-Cabin Pick-ups
| Category | Previous Tax | Proposed Tax | Increase |
| Imported | 25% | 30% | +5% |
| Locally made | 7.5% | 10% | +2.5% |
Advance Tax on Registration
Car buyers will need to pay up extra Advance Tax at the time of registration for their vehicles. The amount has been doubled across the board.
| Capacity | Previous Tax (Rs.) | Proposed Tax (Rs.) | Increase (Rs.) |
| 1000cc | 50,000 | 100,000 | +50,000 |
| 1001cc-2000cc | 100,000 | 200,000 | +100,000 |
| 2001cc-above | 200,000 | 400,000 | +200,000 |
Car prices have been doubled in last three years & now these taxes. What Govt is going to do?
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