The Federal Board of Revenue (FBR) has imposed a 25% sales tax on domestically manufactured or assembled cars if the invoice price exceeds Rs4 million — a decision that would hit the “already suffering” auto industry, The News reported Saturday.
In a notification issued by the FBR on Friday, 25% sales tax would continue to be applicable on locally manufactured or assembled vehicles having engine capacity of 1400cc and above.
The Economic Coordination Committee (ECC) and the federal cabinet, during the tenure of the former caretaker government, had granted approval for slapping 25% general sales tax (GST) on all vehicles manufactured locally with prices above Rs4 million or above 1400cc engine capacity or double cabin.
The decision was lamented by Pakistan auto manufacturers who urged the government to scrap the increased sales tax, saying that it would only affect the domestic car makers and not the importers of used cars.
The FBR has estimated to collect Rs4 to Rs4.5 billion through these taxation measures annually.
The ECC had approved the summary of FBR under which all vehicles above 1400cc were imposed 25% GST. But, the FBR added another condition that all vehicles above 1400cc having a price over Rs4 million would have to pay 25% GST.
Earlier, the vehicles above 1400cc engine capacity were paying 25% GST. But now the element of price was also incorporated, so vehicles having a price of more than Rs4 million would have to pay 25% GST instead of 18%.
However, for those vehicles up to 850cc, the GST rate was fixed at 12.5%.
The government had imposed an enhanced GST rate of 25% on luxury vehicles in the last budget on those vehicles having engine capacity above 1400cc.
The enhanced GST rate is applied in different countries to curb luxury vehicles, and in some countries, the rate was even on the higher side, said FBR official.
