25% sales tax imposed on locally-made cars worth over Rs4 million

Putting more burden on the already suffering auto industry, the Federal Board of Revenue (FBR) has imposed a 25% general sales tax (GST) on locally manufactured or assembled cars worth over Rs4 million.

The tax would be imposed on vehicles of 1400cc or above, the tax body said in a notification.

The approval for slapping a 25 percent tax was granted by the Economic Coordination Committee (ECC) and the federal cabinet during the tenure of the former caretaker government.

The new tax is expected to yield an annual revenue of Rs4 billion to 4.5 billion rupees, according to FBR.

However, the Pakistan Automotive Manufacturers Association (PAMA) rejected the decision, saying the measure would only hit the domestic car makers and would enhance negative sentiments for the consumers.

“I expect a sales drop of 50-60pc in locally assembled vehicles in coming months given price hike on account of GST hike which will make buyers further reluctant towards locally produced vehicles,” a cars dealer said while speaking to a private news channel.

Earlier, the ECC said that all vehicles above 1400cc would be liable to pay 25% GST. Later, it added another condition that all cars over 1400cc with a price of above Rs4 million would have to pay 25% GST.