The PTI government presented its first federal budget for 2019-20 on 11th June 2019 as we analyze what it has to offer for the automobile sector of Pakistan. The debating point has so far been the expansion of the scope of Federal Excise Duty (FED) on all categories of locally manufactured/assembled cars. Previously, the government was only charging a 10% FED on vehicles of 1700 cc engine displacement and above, but this is not the case anymore. All the local cars will now come at the cost of some amount of FED, which is categorized into three slabs as follows:
- 2.5% FED on cars from 0 cc to 1000 cc
- 5% FED on cars from 1001 cc to 2000 cc
- 7.5% FED on cars of 2001 cc and above
The decrease in FED on 1700 cc cars and above is another interesting aspect to look out for. Will the automakers decrease the prices of these cars in accordance with the new rates of FED? As a matter of fact, the prices should be decreased but, on the other hand, the depreciation of Pakistani Rupee against the US dollar is resulting in inclined costs of manufacturing cars. At this point, the auto manufacturers were already looking to raise the prices of these cars but waited for the budget 2019-20. So it might not be a surprising element if the automakers decide against the decrease in prices of these cars. Toyota Corolla Grande and Honda Civic 1.8L are the two hot cars in this category. However, the increase in the prices of cars below 1699 cc is definite if the proposed FED gets approved.
Apart from the expansion of the imposition of FED, there are several other proposals which were presented in the budget 2019-20 on the floor of the National Assembly related to the automobile industry.
Exclusion of 3% VAT on Petroleum Products:
There was a 3% value-added tax (VAT) imposed on the products imported by OMC’s previously. It was implemented on the products that had a regulated price tag. Now, the government has proposed the exclusion of VAT on all petroleum products, including furnace oil imported by OMC.
Increase in the fixed price of CNG supplied to the dealers:
The prices of CNG have increased ever since the OGRA has announced deregulation of its prices. The government, on the other hand, had not changed the prices for CNG dealers which are now proposed to be increased region wise.
- Increase from Rs.64.80/kg to Rs.74.04/kg for Region I
- Increase from Rs.57.69/kg to Rs.69.57/kg for Region II
Withdrawal of extra tax on auto parts, tyres and tubes:
There is an extra 2% payable tax in addition to the standard sales tax on several items, which includes auto parts, tyres, and tubes. Since these items are of intermediary nature and consumed by industries, the government has proposed to withdraw this extra 2% tax.
Note here that all these impositions and exemptions of taxes will be applicable only after the proposed budget is approved. From the consumers’ perspective, the proposed FED will only affect the buying power of the citizens as the prices of vehicles will only rise. Drop your valuable thoughts in the comments space and stay with PakWheels for more in-depth and statistical updates on this developing story.