FBR Wants to Increase FED on Cars – Report
It seems the bad days for the auto industry will continue for the foreseeable future. The dollar is going up continuously, then there are production shutdowns, followed by no LCs by the State Bank of Pakistan (SBP), and now the government is planning to roll back the tax relaxations announced in 2021.
The media reports suggest that the Federal Board of Revenue (FBR) has proposed increasing the Federal Excise Duty (FED) on both locally assembled and imported motor vehicles. The institution wants to introduce the hike by promulgating the Tax Laws Amendment Ordinance to generate additional revenue in the upcoming “mini-budget.”
The reports further stated that FBR is considering revenue generation measures to rationalise the rates of FED on cars. In this regard, the government body has started working to finalise the revenue impact of FED raise on vehicles. The proposed increase will depend on the engine size of both imported and locally-assembled cars. However, the government has yet to approve the proposal by FBR.
FED on Imported & Local Cars
The FED saw its ups and downs during the previous government as it initially decreased in Fiscal Budget 2021-22. However, it was increased back under Finance (Supplementary) Bill 2021.After the mini-budget following FED was applied to the locally assembled cars:
- 2.5% on 0-1300cc cars. It is pertinent to mention that FED on 0-1000cc was 0%.
- 5% on 1301-2000cc cars. Earlier, the duty on 1001-2000cc was 2.5%; however, the government has now changed the categories of engine size.
- 10% on cars above 2000cc, which was 5% before the mini-budget.
Meanwhile, the following were the FED rates on imported cars.
- No change in cars with engine capacity up to 1000cc, meaning it stays at 2.5%.
- The duty on cars with engine capacity of 1001cc to 1799cc reached 10% compared to the previous 5%.
- New duty on cars with engine capacity of 1800cc to 3000cc was 30% against 25%.
- Lastly, the duty on cars above 3000cc was 40% against 30%.