Pak Suzuki Sales Tax Issue – Good News for Customers

And there is a good news for the buyers of Pak Suzuki.  In its judgement on the Pak Suzuki Sales Tax issue, Federal Board of Revenue (FBR) has stated that “invoices issued July 1st, 2021 onwards shall be charged to tax at such rate as is in force at time of supply.” It is pertinent to mention that new Auto Policy was implemented on July 1st.

Background of Issue

And here is a bit of background of this whole case. Under the new Auto Policy (2021-2026), the federal government reduced the sales tax on all cars to 12.5% from 17%, along with a 2.5% reduction in Federal Excise Duty (FED) from July 1st, 2021. It means all invoices after this date will have the new tax reductions. One of the biggest beneficiaries of this policy is Pak Suzuki, but it seemed that the company was not ready to transfer this benefit to the buyers.

According to reports, the car manufacturer charged 17% Sales Tax, even after July 1st,  as several customers shared their invoices with us. As per these invoices, the company reduced the FED as per the auto policy; however, the sales tax was still standing at 17%. Furthermore, when customers raised the issue, the company said it had already paid the sales tax on these cars, at the time of booking. Many of these customers have objected to this, but there was no positive response by the company. Hence, some of the affected approached Federal Tax Ombudsman (FTO), which forwarded the case to FBR and as mentioned earlier, FBR has issued its judgment over it.

Current Status

In its notification, FBR has quoted Section 2(44) and Section 5 of Sales Tax Act, 1990, respectively. According to Section 2(44) titled “Times of Supply”:

“A Supply of goods, other than hire purchase agreement, means the time at which the goods are delivered or made available to the recipient of the supply.”

Meanwhile, the second section titled “Change in the rate of tax” stated:

“A taxable supply made by a registered person shall be charged to tax at such rate as in force at the time of supply.

Decision by FBR

In its judgement, FBR stated the complaint against Pak-Suzuki was examined and the contention by the complainants, of not being provided relief extended by the government, was found correct by the authority.

The FBR has also recommended to the Federal Tax Ombudsman that all cars that were invoiced or delivered in July will be subject to the relief provided by the government and that the complaints may be dealt in accordance with the law.

What is Next? 

FBR has sent the case back to Federal Tax Ombudsman (FTO), where the next hearing of the affected consumers is scheduled for 9^th September 2021. The FTO will pass a verdict on the facts submitted by FBR on the said date.

Response by Pak Suzuki 

We have approached Pak Suzuki for the comment. However, the company has not issued any statement. We will update the article, as soon as, car manufacturer will give a response.