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FBR Rejects 18% Sales Tax on Locally Manufactured Cars

The Federal Board of Revenue (FBR) has rejected the Ministry of Industry’s request to levy an 18 percent general sales tax (GST) on locally manufactured cars.

The Ministry of Industries had suggested standardizing the sales tax rate at 18 percent for all local assemblers, with an exemption for cars below 1,400cc, reported Express Tribune.

The FBR didn’t agree, arguing that such a move would lower the tax rate on vehicles currently subject to a 25 percent sales tax and hurt the tax base. The tax machinery said such an arrangement would go against the $3 billion Stand-By Arrangement with the International Monetary Fund.

The FBR also discarded the plan on the basis that it would allow SUVs and other cars that currently pay 25 percent GST to pay just 18 percent tax, which would cause revenue losses and hurt the tax base.

The regulator noted that the GST was enhanced from a standard 17 percent rate to 25 percent in March 2023 to address both fiscal and current account issues in the first place.

It is pertinent to mention that the IMF wants Pakistan to cancel certain schedules and exemptions related to GST, including the removal of the Fifth Schedule and restricting exemptions under the Sixth Schedule to only residential property transactions. IMF wants all goods to be charged a standard GST rate, except for essential items like food staples, education, and health goods which could be taxed at 10 percent.

The lender wants reduced rates under the Eighth Schedule canceled. It wants the government to end compliance-related tax policies such as minimum taxes and surcharges.

  • It was better proposal due to many factors , because this automobile manufacturing sectors needs reforms as well while considering their profits, there are 101 ways to cover dent of 3 Billion US $

    • Profit margins of auto companies are peanuts when compared with cement, fertilizer and textile sector companies.

      • Please do your research properly. Textile sector is paying multiple taxes with no benefits at all. While they also bring foreign currency but still policies didn’t support textile sector. Several Factories have shutdown there process and you say they gain profit margins.

  • This FBR and IMF both are idiots or they act like ones …. they don’t know that already the auto industry is in shambles due to dollar like and plants are nearing closures but these regulators are just sitting like IMF’s touts …. IMF want tax revenue to increase not to impose heavy taxes on industry …. instead of reducing tax and increasing sales thereby collecting more tax they just increase tax …. we have a set idiots running the regulators with no sense of tax science 🙄

  • In ko koi samjhaye k ziada tax laganay say ziada amount collect nahen hoti. Pata nahen kon baytha hay policy maker.

  • Too much Tax and duties on Automobile sector has make in Pakistan cars much Expensive and beyond reach of a middle class family …Government must reduce Taxes

  • Always the burden of tax is paid by end user, which in turn increase inflation in the country. Heavy taxation impedes the economical activities. Decreasing the purchasing power of the masses upsets the whole society set-up. But no one cares as the decision makers are affected the least. The actual tax evaders are escaped by the FBR staff.
    Better to rewamp the financial system.. still not read the current cabinet FBR reforms. Will comment later. Thanks

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