Auto Policy (2021-2026) – Here are New Tax Reductions
After much anticipation and wait, the federal government has finally announced the Auto Policy (2021-2026). Under this policy, the auto industry will have multiple tax reductions for the next five years. It is pertinent to mention that Pakistan’s first Auto Policy expired on June 30, 2021.
Earlier in the Annual Budget (2021-22), the government reduced Sales Tax for locally-assembled cars up to 850cc from 17% to 12.5%. Later, the offer was extended to 1000cc vehicles.
Announcing the policy, Federal Minister Khusro Bakhtiar said that following are tax reductions offered to the industry:
- Federal Excise Duty (FED) is reduced from 2.5% to 0% for cars up to 1000cc
- FED for vehicles from 1001cc to 2000cc is cut to 2.5% from 5%
- FED for cars between 2001cc and 3500cc is decreased to 5% from 7.5%
- Customs Duty on import of CKD non-localized kits upto 850cc has been reduced to 15% from 30% and for localized the duty is decreased to 30% from 46% for new models till June 30th, 2024 or from the date of issuance of manufacturing certificate
- 7% Additional Customs Duty (ACD) on CKD kits for cars upto 850cc abolished for 2 years
- 7% ACD and 15% Regulatory Duty (RD) on CBU cars upto 850cc has also been exempted for 2 years
Furthermore, there are other concessions involving provincial governments. Under these concessions:
- The Punjab government will grant up to 5% discount on the motor tax vehicles paid under the Punjab Motor Taxation Act 1958. However, the offer is only for Electric Vehicles
- Punjab government will offer 10% rebate in the amount of total annual tax during the first quarter
Meanwhile, Khyber Pakhtunkhwa (KP) government has announced in its provincial budget that it will receive only Rs1 as registration fee for cars up to 2500cc. Furthermore, the province will re-register the cars without any charge.
The ball is Now in Companies’ Court:
Now the ball is the court of car companies, whether they shift these benefits to consumers or not. It is expected that the buyers will get cheap cars in the coming days. We have shared the expected reduction in car prices of 1000cc, 1001cc-2000cc and 2001cc-3500cc cars.