FBR imposed 25% sales tax on cars priced over 4 million rupees

The Federal Board of Revenue (FBR) has imposed a 25% sales tax on cars whose price exceeds 4 million rupees. This decision of FBR will affect the already suffering auto industry.

According to the notification published by the FBR, a 25% sales tax will continue to be imposed on locally made or assembled cars with engine capacities of 1400cc or more.

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During the last caretaker government’s mandate, the Economic Coordination Committee (ECC) and the federal cabinet approved a 25% general sales tax (GST). It applies to all locally built vehicles with prices exceeding 4 million rupees on 1400cc engine capacity or double cabin.

Pakistani automakers criticized this decision and urged the government to cancel the additional sales tax. They claimed it would primarily hurt native car producers and second-hand car importers.

The FBR expects to collect 4 to 4.5 billion rupees annually through these tax strategies. The ECC had accepted the FBR summary which imposed a 25% GST on all automobiles over 1400cc.

However, the FBR introduced a condition that any automobiles over 1400cc with an MSRP (Manufacturer’s Suggested Retail Price) of more than 4 million rupees must pay 25% GST.

Click here to read the updates on FBR Tax officers getting extensive powers to widen the tax base

Previously, automobiles with engine capacities of more than 1400cc were required to pay 25% GST. However, the government has now added a price element. Hence, vehicles costing more than 4 million rupees would pay 25% GST rather than 18%.

Earlier, the GST rate for automobiles with a capacity of up to 850cc was fixed at 12.5%. In the previous budget, the government increased the GST rate on luxury automobiles by 25% for those with engine capacities greater than 1400cc.

According to an FBR official, various countries used high taxes to discourage luxury vehicles. Hence, the rate is much higher in certain cases.