Government to Include Commercial Vehicles Into Witholding Tax Net

On July 1, 2022, the Federal Board of Revenue (FBR) increased withholding tax (WHT) on motor vehicles with engine capacity of 1601cc and above.

However, FBR’s income tax explanatory circular on Finance Act 2022 stated that the provision of section 231B was limited to private motor vehicles. The scope of WHT has now been enhanced through the omission of the word ‘private’ from the heading and elsewhere in the section.

Furthermore, an inclusive definition of a motor vehicle has been provided in the substituted sub-section (7) of section 231B with the following exclusions:

A motor vehicle used for public transportation, carriage of goods and agriculture machinery; a rickshaw or a motorcycle rickshaw and any other motor vehicle having engine capacity upto 2 00cc. Except motor vehicles mentioned, provision of section 231B will apply on motor vehicles of all makes and models irrespective of its private or commercial use by the end users.

The WHT required to be collected at the time of purchase or registration of a motor vehicle has been enhanced for vehicles with an engine capacity of 1601cc and above.

In cases of electric vehicles (EVs) where engine capacity is not available and the value of the vehicle is Rs. 5 million or more, the amount of tax collected will be 3% of the import value.

A new provision has been inserted whereby a vehicle in which engine capacity is not applicable (electric vehicles) and the value of said vehicle is Rs. 5 million or more, then tax amount of rupees Rs. 20,000 will be collected at the time of transfer of registration or ownership.

In case a person does not appear in the active taxpayer list, tax collectible under this section will increase by two hundred percent. Currently, advance tax on passenger transport vehicles plying for hire is collected on the basis of the seating capacity of the vehicle by Excise and Taxation authorities.

The rates of adjustable advance tax on such vehicles provided in Division III of Part IV of the First Schedule of the Ordinance have been enhanced by substituting the Table in a specified manner, FBR added.