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    Mini-Budget – Proposed Tax Increase on Cars


    As federal government has presented the much awaited mini-budget today in National Assembly, here are proposed duties and taxes for auto sector.

    For locally assembled cars, the government has suggested following:

    • Federal Excuse Duty (FED) on locally assembled cars up to 1000cc to remain 0%
    •  FED increase to 5% from 2.5% on 1001cc to 2000cc cars.
    • FED on cars above 2000cc increase to 10% from 5%

    Meanwhile, the FED on CBU cars is as follows:

    • FED on cars up to 1000cc will remain 0%.
    •  FED on cars of 1001cc to 1799cc will increased to 10% from 5%
    • FED on 1800cc to 3000cc cars will increase to 30% from 25%
    • FED on cars above 3000cc increased to 40% from 30%

     

    Meanwhile, to curb the ‘ON Money’ the government has proposed following steps:

    • Advance Tax on Vehicle Registration of cars up to 1000cc will increase to Rs100,000 from Rs50,000
    • Advance Tax increase on 1001cc to 2000cc cars to Rs200,000 from Rs100,000
    • Advance Tax on 2100cc and above cars will increase to Rs400,00 from Rs200,000

    As per experts and analysts, the government has proposed these new taxes to control the widening trade deficit. During 2021, Pakistan has witnessed all time high import of vehicles in Fiscal Year (FY) 2021. The jump was observed after record breaking spending of foreign exchange on highest-ever of new automobiles in 2020-21 on strong demand.

    New Vehicle Import Data

    As per data, the country imported 10,513 units of new cars, jeeps, vans, pickups, two-wheelers and buses in FY21. In comparison, Pakistanis imported 1,680 units in FY20, 3,716 units in FY19 and 7,424 units in FY18.

    Also, for the first time in country’s history, 390 new Electric Vehicles (EVs) and 19 used EVs were also imported in FY21.

    During this fiscal year, new cars and jeeps saw the highest share of import. As per the statistics, 10,157 units were imported compared to just 893units in FY20, 2,427 units in FY19 and 3,758 units in FY18.

    New Vehicle Import Bill 

    In overall automobile import bill stands at $2billion. The import bill of completely and semi-knocked down (CKD/SKD) kits for cars, bikes, and heavy vehicles is %1.6billion against $727million in FY20. Meanwhile, $386million were spent for import of used and new vehicles in FY21 as compared to $219million previous year.

    Import Bill of CKD/SKD Vs CBU

    Furthermore, in the first two months of current fiscal year (2MFY22), the import of CKD/SKD kits for local assembly of all vehicles have increased by 214% to $369million from $117million in the same period last year.

     





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