Get Ready for Another Possible Price Increase for CBU Cars Soon

Luxury car buyers are likely to be hit with another price hike missile as the government proposed an increase in the General Sales Tax (GST) on high-end products from 17% to 25%.

The government is yet to define a proper segment of cars that may be included in luxury imports. According to the Federal Board of Revenue’s (FBR) definitions, luxury items also include cars with 1,500-3,000cc engines.

Although, a reliable source has told ProPakistani that only the completely built-up (CBU) imports will be subject to tax rate hikes.

The government is yet to approve the new taxes on vehicles. These rates will be finalized once FBR issues an official notification in this regard after the cabinet’s approval.

Impact on Sales

The government aims to extract more revenue from the auto industry with the GST hike. However, the resultant price hikes may take a toll on the already dwindling car sales.

In January, carmakers (association members only) collectively sold just 10,867 vehicles in January 2023, witnessing a month-over-month (MoM) decrease of 36%, but a year-over-year (YoY) decrease of 47%.

In this regard, the Pakistan Automotive Manufacturers Association (PAMA) and the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) sent a joint letter to the State Bank of Pakistan (SBP) Governor Jameel Ahmed.

The letter stated that the industry is struggling due to SBP’s restrictions and banks’ lack of cooperation. As a result, factories are facing intermittent closures while assemblers and vendors are laying off workers.

The letter warned that if corrective measures are not taken, this scenario will result in mass unemployment, government revenue loss, auto assembly plant closures, and a mass exodus of foreign investors.

Both associations cited these facts and urged the SBP governor to withdraw the import restrictions.