Tax from new car registration down by 10%
KARACHI: During the first 10 months of the current fiscal year, the Federal Revenue Board (FBR) has collected Rs 8.28 billion in withholding tax from the registration of new cars, down 10.2% over the corresponding period a year earlier, because the auto sales declined due to economic downshift, sources said on Thursday.
During the fiscal period of July-April (2017-18), approximately RS. 9.23 Billion of withholding tax collection on the registration of new cars showed a sharp decline.
During the period under review, auto sales slipped around 4.5% as weak rupee-driven price hikes deter new car sales and the restrictions on non-filers to own vehicles also impacted sentiments. However, in order to arrest the sales decline, the restriction was subsequently lifted.
Apart from this, despite the relaxation to non-filters of the tax returns, withholding monthly tax collection on the registration on the new cars has also indicated a decline.
In April, around 15.4 % of the decline in withholding tax was recorded. Details showed that the tax fell from Rs 1.078 Billion to Rs 912 million in the same month of the fiscal year.
Even car sales declined too. Last fiscal year, about 170,354 units of car sales were recorded while in July-April, car sales were 162,692 units showing a 4 percent decline in total car sales.
The study revealed that this decline in car sales is due to the economic slowdown which in return affected the collection of income tax. Due to the devaluation of money, the manufacturers increased the prices of automobiles which not only decreased the sales of cars but also impacted the collection of withholding tax overall. Since January, last year, the Pakistani rupee has lost around 35% of its value against the US Dollar.
Following the restriction imposed on the non-filters in owning the cars, a continuous decline has been observed in the withholding tax collection of cars.
Read Also: Honda Atlas Cars’ profit down by 15% in 4QMY19
Through the Finance Act of 2018, the government has added a section 227 into the Income Tax Ordinance 2001, through which non-filers of income tax were prohibited from registering both imported and locally assembled cars. In order to relax the terms and conditions for the registration of new cars for non-filers, an effort was made by the government and for the first time, a mini-budget was presented by the government in September 2018. However, this idea was opposed by the stakeholders from opposition and government had to drop this idea. In February 2019, the government presented a second mini-budget, in which govt. Allowed the non-filers to buy the locally manufactured cars easily while in case of the imported cars, the restriction remained intact. This step was taken because the local car industry recorded a steep decline in sales due to the aforementioned conditions.
Besides allowing the non-filers to register for new cars, govt has raised the withholding tax by 50% for non-filers which will raise the additional revenues for the government.
Apart from this, the FBR, under the law of section 231B, has imposed a withholding tax on the registration of private motor vehicles as well. Every motor vehicle registration authority of both excise and taxation under this section is entailed to collect and deposit the amount to the exchequer.
That’s it from our side, drop your thoughts in the comments section below.