The government of Pakistan is going to announce the annual budget 2022-23 later today. The Federal Finance Minister Miftah Ismail will be presenting the budget at the National Assembly. The senate and assembly members will discuss the budget for approval. That means what we’ll see today will be the first draft; the final budget will be out in a few days.
The annual budget has an automotive section that includes taxes on locally assembled and imported vehicles. While we wait for the new budget, here is a recap of the annual budget 2021-22 and the tax benefits and incentives it offered for the auto sector.
Tax Relief for Locally Assembled Fuel Cars
Last time, the government ended the Federal Excise Duty (FED) on locally assembled cars up to 1000cc from 2.5% to 0%.
FED on cars from 1001cc to 2000cc was reduced to 2.5% from 5%.
FED on cars above 2000cc was reduced to 5% from 10%.
Meanwhile, sales tax on all locally assembled cars was reduced to 12.5% from 17%.
Tax Relief for Locally Assembled Electric Vehicles
The last annual budget offered massive tax reductions for EVs (Electric Vehicles). The government ended the FED on all locally assembled EVs, making it 0%.
Sales tax on locally assembled EVs was reduced to 1% from 17% for passenger vehicles with a battery pack of up to 50 kW and light commercial vehicles with a battery pack of up to 150 kW.
For hybrid vehicles, the government reduced the sales tax to 8.5% on cars with engine size up to 1800cc and 12.75% on cars from 1801cc to 2500cc.
Current Vehicle Taxes
Unfortunately, the above tax reductions didn’t last long as the government passed the mini-budget six months after the annual budget 2021-22 and drew all the incentives back. Here are the current taxes on locally assembled vehicles.
- 2.5% FED on 0-1300cc cars
- 5% FED on 1301-2000cc cars.
- 10% FED on cars above 2000cc
- 17% Sales Tax on all locally assemble fuel cars
- 0% FED on all locally assembled EVs
- 8.5% Sales Tax on hybrid cars up to 1800cc
- 12.75% Sales Tax on hybrid cars from 1801cc to 2500cc
Here’s the thing: the last budget reduced the duties and taxes on all vehicles, but this one will do the complete opposite. This time, the government is planning to increase the duties and taxes on locally assembled cars. Meanwhile, all kinds of vehicle import (used or new) is already banned.
Brace yourself, people; the budget is coming!
