In his Finance (Supplementary) Act 2023 speech, Finance Minister Ishaq Dar announced two new slabs of General Sales Tax. The first one was 18% from 17% on all items, and the second was 25% on all luxury items, cars are included in both slabs. After the imposition of 1% GST, all the car companies increased prices in the last couple of weeks, and now the talk of the town is luxury items and 25% GST.
There are different news regarding it, firstly the reports are suggesting that the government has included cars with engine capacity of 1800cc and above in luxury items. We did a detailed blog on this proposition and listed the cars and their expected prices after the implementation of 25% GST. As per our calculation, the prices can go up to Rs. 38 lacs; for example, the price of a Toyota Fortuner Legender would be Rs. 19,186,441 from the current Rs. 18,112,000. You can read about the 1800cc and above cars in this blog.
Meanwhile, some media reports suggest that the Federal Board of Revenue (FBR) will include 1400cc and above cars in the list of luxury items. In this case, all the major sedans and SUVs will observe a price hike excluding Suzuki cars. The list would include vehicles like Toyota Yaris, Changan Alsvin (1.5L), Honda Civic, Toyota Corolla and Toyota Yaris (1.5L), and Honda City (1.5L). The new wave of price hikes will affect most locally assembled cars, meaning they would be further away from the reach of the common buyer.
What Do Experts Say?
There are two opposite views; currently, some experts believe that the government would not include 1400cc and above cars in luxury items because it would bring a new inflation storm. They think it would leave a deep dent in the local car industry, and companies would be facing tougher times ahead along with the buyers, and the local market is not in the condition to face such shock.
On the other hand, some experts believe that the government has no choice and would have to include 1400cc cars in the luxury items. “If you look at the current deficit and overall economic condition, the government has no choice except to include these cars in 25% GST net,” they asserted.
FBR Statement
We asked an official of FBR to get a clear picture; however, the official told PakWheels.com that no list has been approved yet. “The list will be approved today or tomorrow, so we have to wait till then,” the official added.
In conclusion, the situation is quite murky, just like the condition of the local car industry. And as the official said, we have to wait slightly longer to get clarity. Hence, wait and watch.
Which category would be added to the 25% GST slab? Is it 1400cc or 1800cc? Please share your thoughts in the comments section.
A car over 1400CC is always a luxury, that is why people with an income between 100,000 and 150,000 has always preferred a new hatchback over a used sedan. Their core aim is to save on fuel, therefore, 1400CC must be placed within 25% GST. The decision would teach IMC a lesson, they ditched a tried and tested formula, and replaced a 1300CC vehicle with 1350CC vehicle. What value their stupid decision has done? Higher consumption of petrol without giving any extra carrying facility as compared to other sedans.
Just to be clear, Xli and Gli were offering more space than other mass bought sedans, as a result their mass sedan market share was exceptionally high between 1996 and 2019. Now it is lost to Honda City and Proton Saga is catching up, it might have overtaken Toyota Yaris had its parts been cheaper and delivery time lower.