The Government has announced massive increase in the taxes on cars with the approval of the Mini-Budget (State Bank of Pakistan (Amendment) Bill 2021 and Supplementary Finance Bill). The Government has introduced several hikes in the Federal Excise Duty (FED) and Sales Tax on locally assembled and imported cars.
Taxes on Locally Assembled Cars
According to the details, the Government has introduced massive increase in the Federal Excise Duty (FED) on locally assembled cars, including a 2.5% increase on taxes for cars from 0-1300cc engine capacity while the previous rate of FED for this category was 0%.
Meanwhile, the Federal Excise Duty (FED) on cars with 1301-2000cc engine capacity has been raised from 2.5% to 5% with a 2.5% increase. It is pertinent to mention that the Government has also adjusted the category as previously, the 2.5% FED was being implemented on 1001-2000cc cars.
Moreover, there is also an increase in the FED from 5% to 10% for cars with 2000cc and above engine capacity in the mini-budget. This will bring a huge impact on the price of luxury vehicles in Pakistan, however, this saves the most popular SUVs like Sportage and Tucson from the massive increase as they fall just 1cc short of 2000cc.
Taxes on EVs and Hybrids
The Government has also announced an increase in the General Sales Tax on Hybrid and Electric Vehicles (EVs), both locally assembled and Completely Built Units (CBUs), in the Mini-Budget.
According to the details, the Government has announced an 8.5% GST on Hybrid Cars up to 1800cc, while 12.75% GST will be applied on Hybrid Cars from 1800cc to 2500cc. Meanwhile, there is an increase in the General Sales Taxes (GST) on imported electric cars (EVs) from 5% to 12.5%.
Regulatory Duty on CBUs
The Government also announced a MASSIVE increase in the Regulatory Duty (RD) on imported cars or Completely Built Units (CBUs) in the Mini-Budget as well. These new taxes on cars will greatly affect the automotive market after this massive hike being introduced by the Government.
The Regulatory Duty (RD) on cars over 850cc engines but not more than 1800cc engines has been increased from 15% to 50%, while Completely Built Units (CBUs) of Hybrid Vehicles 1500cc to 1800cc engine capacity will an increase in the RD from 15% to 50% as well.
Furthermore, there is also increased taxes on electric cars (EVs) with a battery pack of over 50kWh with the imposition of 10% Regulatory Duty. However, this does not include commercial trucks and busses.
The Government has increased taxes on cars, both locally assembled and imported, in the Mini Budget which will increase cost of nearly all vehicles currently in the market.