Govt Imposed Massive Tax Hike on CBUs

Continuing its policy of imposing new taxes on the auto industry, the Economic Coordination Committee (ECC) of the cabinet has approved massive Regulatory Duty (RD) hikes on CBU units of Electric Vehicles (EVs), Hybrid Vehicles and cars with spark/compression ignition engines (conventional engines).

Regulatory Duty on CBUs

The government has increased RD on the CBUs as follows: 

• RD on conventional engine cars over 850cc but not more than 1,800cc increased from 15% to 50%.
• RD on all CBU hybrids, with an engine capacity of over 1,500cc but not more than 1,800cc, increased from 15% to 50%, 
• Imposition of 10% RD on EVs with battery packs of over 50kWh. However, commercial trucks and buses are not included in it.

The reports suggested that the RD has been imposed to control the trade deficit due to heavy import bill. The data shows that the country imported 26,000 cars during the first five and half months of the current fiscal year. 

What Do We Think? 

We think the government should decide what it wants to do? First it brought new auto policy, then there was a mini-budget and now the decision by ECC. Although, the decision is a right one as CBUs have increased the import bill and the government has imposed new taxes on cars with big engines, but such repeated steps create confusion among the buyers.

For example, the cars which are in sea or parked at Karachi port will take more time in clearance. The authorities will delay the clearance process and may demand increased RD on all cars. So, again, government should decide what it wants.

Mini-Budget and FED

The new RD implementation comes days after the mini-budget in which the government proposed a hike in Federal Excise Duty (FED) on both locally assembled and CBUs. 

For locally assembled cars, the government has suggested the following:

• Federal Excuse Duty (FED) on locally assembled cars up to 1000cc to remain 0%
•  FED increase to 5% from 2.5% on 1001cc to 2000cc cars.
• FED on cars above 2000cc increase to 10% from 5%

Meanwhile, the FED on CBU cars is as follows:

• FED on cars up to 1000cc will remain 0%.
•  FED on cars of 1001cc to 1799cc will increase to 10% from 5%
• FED on 1800cc to 3000cc cars will increase to 30% from 25%
• FED on cars above 3000cc increased to 40% from 30%

And, to curb the ‘ON Money’, the government has proposed the following steps:

• Advance Tax on Vehicle Registration of cars up to 1000cc will increase to Rs100,000 from Rs50,000.
• Advance Tax increase on 1001cc to 2000cc cars to Rs200,000 from Rs100,000.
• Advance Tax on 2100cc and above cars will increase to Rs400,00 from Rs200,000.

What do you think about these new tax hikes? Do you think it will effect the common buyer? Share your thoughts in the comments section.