Car Prices to Increase Again Amid Supplementary Finance Bill

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Hardly 6 months after the government announced tax concessions on various segments which resulted in a considerable decrease in prices of locally assembled vehicles in July 2021, it has now presented the Supplementary Finance Bill which proposes increased taxes and duties mainly on the auto sector which is likely to see the prices of cars go up again.

The bill was presented by the Minister for Finance Shaukat Tarin on Thursday for final approval in the National Assembly after it was approved by the federal cabinet. The approval of the bill is necessary to ensure Pakistan’s sixth review of the $6 billion Extended Fund Facility gets cleared by the International Monetary Fund’s executive board on January 12, paving the way for the disbursement of about $1bn tranche.

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In addition to a number of other proposals, those primarily related to the auto sector are:

  • Increasing the tax on imported electric vehicles from existing 5% to 17%
  • Increasing the advanced tax on up to 1,000cc vehicles from Rs 50,000 to Rs 100,000; on 1,000cc to 2,000cc vehicles from Rs 100,000 to Rs 200,000 and on those higher than 2,000cc from Rs 200,000 to Rs 400,000
  • Increasing the general sales tax on 850cc to 1,000cc vehicles from 12.5% to 17%
  • Increasing the federal excise duty on imported vehicles having the engine capacity of 1,000cc to 1,799cc from 5% to 10%, on 1,800cc to 3,000cc vehicles from 25% to 30% and on those higher than 3,000cc from 30% to 40%
  • Increasing the federal excise duty on locally made vehicles of engine capacity between 1,000 and 2,000cc from 2.5% to 5% and on those higher than 2,000cc from 5% to 10%
  • Increasing the federal excise duty on locally made double cabin vehicles from 7.5% to 10%

The sea-saw effect on car prices continues & with these recent changes in the taxes that is likely going to push the car prices up, will cast a negative effect on automobile sales in the country. What is your opinion regarding the impact of finance bill on car sales in Pakistan, let us know with your comments.

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