Tax Collection from Car Registrations Declined by 40%

Tax collection from new cars’ registration saw a sharp 40% decline in the first nine months of the current fiscal year 2019/20 as auto sector was badly hit by slowdown in economic activities.

Related: Tax Drive Blamed for Decline in Car Sales

The tax collection from new car registration amounted to Rs 700 million during the July 2019 to March 2020 compared to Rs 1.162 billion in the corresponding period of the last fiscal year. Withholding tax collection from transfer of motor vehicles also dipped by 14% in the period under review. The collection amounted to Rs 782 million compared against Rs 905 million, according to the Regional Tax Office (RTO-II) Karachi, which has jurisdiction over collecting of withholding tax on registration and transfer of motor vehicles by the provincial motor vehicle registration authority.

The economy is likely to shrink further this fiscal year as the novel coronavirus-lockdown has brought the economic activities almost to a halt. In July-March, slowdown in economic activities and constantly rising car prices has brought down auto sales & the revenue, according to the sources in RTO-II.

Related: COVID-19 Poses Greater Threat to Local Auto Sector

According to the data released by Pakistan Automobile Manufacturers Association (PAMA), car sales witnessed a 47% decline with 97,664 units sold during July-March FY20 compared to 185,023 units sold in the same period of the previous fiscal year. And with sales hitting a record low since that in December 2008, the revenue collection for April will suffer even more.

The decline in tax collection from car purchase is also attributed to the introduction of new provisions of 100% additional tax on non-compliant taxpayers. Through Finance Act, 2019 a 10th schedule was introduced into Income Tax Ordinance, 2001 under which a taxpayer who fails to file income tax returns by due date or not on the tax net is subject to pay 100% higher tax rate at the time of making certain transactions.

Related: Local Automakers Want Tax Relief from the Government

As per the applicable withholding tax rate on motor vehicle, the minimum engine capacity of up to 850cc attracts Rs 7,500 for taxpayers included in the active taxpayers list (ATL) and Rs 15,000 for those who are not in the ATL. The sources said the increase in number of income tax return filers also reduced the revenue collection under the head.

Source: The News

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