Just a week after our initial report about a potential new tax on petrol and diesel vehicles, Finance Minister Muhammad Aurangzeb has confirmed it in the annual federal budget 2025-26. The recently announced federal budget for 2025-26 introduces a new levy on internal combustion engine (ICE) motor vehicles, impacting both manufacturers and importers.
This move aims to generate revenue and potentially steer the market towards more eco-friendly options in the long run. Let’s break down this new tax in an easy-to-understand way.
Understanding the New Tax (Levy)
So, how does this new tax work? It’s pretty straightforward: it’s a percentage of the car’s price. The exact percentage changes based on if the car is made here or brought in from somewhere else, and how big its engine is. Good news is, this percentage already includes all other taxes and duties, so you don’t have to do extra math.
Who Pays What?
The new levy is structured into several categories, ensuring different vehicle types and origins are taxed appropriately:
- Smaller Local Engines (Under 1300cc): For locally assembled or manufactured cars with an engine under 1300cc, the manufacturer will pay a 1% levy on the car’s value. For example, on a Rs. 100,000 car, Rs. 1,000 will be added as tax. The same applies to imported vehicles.
- Mid-Range Local Engines (1300cc to 1800cc): Cars with engines between 1300cc and 1800cc, whether locally made or imported, will face a 2% levy. This means manufacturers will pay 2% of the vehicle’s value.
- Larger Local Engines (Over 1800cc): For cars with engines over 1800cc, the manufacturer will pay a 3% levy of its price value, whether locally assembled or imported.
- Local Buses and Trucks: Commercial vehicles like buses and trucks, whether locally assembled or imported, will be subject to a 1% levy on their price, paid by the manufacturer.
What Does This Mean for You?
For consumers, this new levy will likely translate into slightly higher car prices. While the percentages might seem small, especially on higher-value vehicles, they can add up. For manufacturers and importers, it means an additional cost to factor into their pricing and business models.
This new tax is part of a broader government strategy to boost revenue and potentially encourage a shift towards alternative fuel vehicles in the future. While the immediate impact will be on the price of petrol and diesel cars, it’s a move that signals the government’s direction in the automotive sector. It will be interesting to see how this new levy influences consumer choices and the strategies of automotive companies in Pakistan.
