Car prices may go down by Rs300,000 in budget

The government is considering tax measures in the budget that may result in reducing prices of the car up to Rs 300,000 in Pakistan.

At present, as the car prices in Pakistan are high, the government may approve some tax measures in the budget to reduce the prices for the middle. Therefore, the Ministry of Industries proposes different relief measures on account of tax that may bring the price of a car low in the budget.

In the small category, the consumer may face relief of Rs 300, 00 in the price of new imported car prices a new imported car to Rs400, 000, subject to the implementation of this proposal.

There is also proposed to eliminate 2.5% federal excise duty, cut the GST rate to 12% and end Rs7,500 advance income tax on locally made cars of up to 800cc. The prices of a 660cc Suzuki VXL car in Pakistan may come down by Rs109, 000 to Rs1.53 million.

However, the government may cut taxes on new imported and locally assembled cars of up to 800cc engine capacity in the next budget to make them affordable for the middle class.

PTI government is likely to slash import duties and taxes on new imported cars by up to 63% and reduce them by nearly 7% for locally made cars in order to reduce prices in Pakistan.

The proposal envisages ending 50% regulatory duty, reducing custom duty by 7% additional customs duty. Ministry of Industry also proposes abolishing 2.5% federal excise duty on new imported cars.

There is also proposal on a table to to abolish 5% withholding tax and cut the standard general sales tax (GST) rate of 17% to 12% on the import of new cars of up to 800cc that may result in reducing prices in Pakistan.

At present, combined taxes and duties on new imported cars of up to 800cc amount to around 132% of the prices of cars in Pakistan. This proposal may result in reducing the price of imported cars by 63%.

In the small category, the consumer may face relief of Rs 300, 00 in the price of new imported car price of a new imported car to Rs400, 000, subject to the implementation of this proposal.

The local car assemblers have been enjoying protection in duties and pocketing money from the consumers on account of ‘own money on the delivery of cars. Therefore, the government plans to cut taxes on the small categories of imported cars to make them affordable within their purchasing powers.

There is also proposed to eliminate 2.5% federal excise duty, cut the GST rate to 12% and end Rs7,500 advance income tax on locally made cars of up to 800cc. The prices of a 660cc Suzuki VXL car may come down by Rs109, 000 to Rs1.53 million.

However, local carmakers have started lobbying and building pressure on the government to shelve this plan of reducing taxes on imported cars. The high ups of Indus Motors have also met Prime Minister Imran Khan to press any relief on the import of new cars.

Prime Minister Imran Khan had directed to prepare proposals to make prices of 0small car affordable for the the middle class that currently cannot afford them.

Officials say that newly appointed Finance Minister Shaukat Tarin has backed the proposal of reducing some taxes. However, the federal board of revenue and finance ministry is opposing this plan as it would result in a shortfall of revenue.

Pakistanis imported Rs297 billion worth of vehicles and paid Rs175 billion in duties and taxes at the import stage During the July-April period of this fiscal year.

There has been an increase of 68% in the import of vehicles that resulted in a jump of duties and tax collection by 77% during this period.

The government collected Rs85 billion in customs duty – up 76%, Rs67.2 billion in sales tax – higher by 61%, Rs15 billion in income tax -up 119% and Rs7 billion in federal excise duty – higher by 367% during the July-April period, according to the FBR numbers.