Budget 2023-24- Govt Ends Tax Cap on Asian Make Used Vehicles

The government presented Fiscal Budget 2023-24 today. Federal Finance Minister Ishaq Dar announced it during his speech in national assembly. During his speech, the federal minister proposed following taxes and duties systems for cars and automobile industry.

Proposed Taxes on Cars in Budget 2023-24

During his speech, the finance minister said:

• A duty and taxes cap on import of old and used vehicles up to 1800cc of Asian Make was imposed in 2005. Now this duty and taxes limit on vehicles above 1300cc is removed under this budget.
• It means, the tax cap up to 1300cc will remain intact.

And if we look at the FBR S.R.O 577(I)/2005, it states: “The import of old and used vehicles of Asian makes are exempted from customs-duty, sales tax and withholding tax as cumulative amount of specified in following table:

Explanation 

Earlier, the government was receiving fix amount of dollars in taxes no matter what the price of that car was in its original market, for example, the tax on Toyota Aqua, Vitz and Honda Fit was same in dollars. But now, the government will receive duties and taxes as per its ex-factory price in its original market, i.e., Japan in this case.

Earlier Rumours on Taxes 

Earlier, media reports mentioned about some expected taxes and duties on cars and the auto sector. As per a news channel, the government was planning to propose the following: 

• Increase tax rate on luxury cars
• Tax as per price range on locally assembled cars 

CVT on 1,000 cars 

Some market sources also claimed that the government will propose implementing a Capital Value Tax (CVT) on 1,000cc cars and above. It is pertinent to mention that there was already a 1% CVT on cars above 1,300cc and above. In the last Fiscal Budget, the government earlier proposed 2% CVT on cars with a price over Rs. 5 million. However, FBR revised it to 1% but imposed it on 1,300cc and above cars. Moreover, the tax was also applied to electric vehicles (EVs) with batteries over 50Kwh.