FBR Withdraws from Providing Sales Tax Relief to Auto Assemblers

The Federal Board of Revenue (FBR) has withdrawn a summary at the eleventh hour that was supposed to get federal cabinet’s approval for reducing sales tax liabilities of the monopolistic car assemblers.

It had been forwarded to abolish 3% value added tax on 32 imported products and charge lower taxes on sales of auto parts, tires, tubes and batteries. The summary was withdrawn the day the cabinet was scheduled to meet and discuss it along with other agenda items.

Related: Auto Industry Begins the New Fiscal Year with 50% Decline in Sales

FBR Chairman Shabar Zaidi has directed the concerned departments to take immediate action against non-filers of sales tax returns for the July-August period. The share of sales tax in the total collection of taxes has sharply increased to 46% during July and August from the traditional level of around 38%.

According to reports, the decision of FBR chairman is that the three products being used by the car assemblers would be taxed at the maximum retail price. However, FBR has kept unchanged its decision to abolish the 3% tax, which will be implemented subject to approval of the federal cabinet.

Car assemblers have been availing many tax concessions and are also protected from international competition, which has deprived consumers of the opportunity to buy imported vehicles at affordable prices.

Related: EV Policy in Jeopardy Due to Tussle between Two Ministries

In an earlier summary, it had been proposed to exclude imported storage batteries, auto parts, tires and tubes from the retail price taxation. The goods are currently taxed on the maximum retail price under Third Schedule of the Sales Tax Act.

The FBR’s revenue collection has fallen short of the target by Rs 64 billion in the first two months of the current fiscal year. During the two months, the FBR collected Rs 579.4 billion and Rs 265 billion or 45.7% of total taxes was collected on account of sales tax.

The finance ministry has sent the new summary for evaluation by the cabinet committee on legislative cases, which is headed by Federal Minister for Law and Justice Farogh Naseem.

Notify of
Inline Feedbacks
View all comments