The Ministry of Industries and Production (MoI&P) has proposed implementing additional withholding tax (WHT) on locally assembled cars to eliminate ‘own money’ from Pakistan according to a report by Business Recorder.
The decision has been taken because of the unnecessarily long delivery time for vehicles in Pakistan which results in the exploitation of consumers through a system of additional payment known as ‘own money’.
In order to discourage this practice, the Ministry of Information and Production (MoI&P) has proposed that an additional withholding tax (WHT) should be implemented on cars for persons who buy vehicles from original equipment manufacturers (OEMs) and sell these within 90 days of delivery.
According to the report, the MoI&P has proposed the following additional withholding tax (WHT) on cars:
| Additional WHT | Engine Capacity |
|---|---|
| Rs. 50,000 | up to 1000cc |
| Rs. 100,000 | up to 2000cc |
| Rs. 200,000 | above 2000cc |
The ‘own-money’ phenomenon has been on the rise in recent months and the issue was brought up during a recent cabinet meeting where attendees, including Prime Minister Imran Khan were of the view that the policy to import vehicles must be reviewed as the restrictions were allowing local manufacturers to exploit money from consumers.
However, the Minister for Industries and Production, Hammad Azhar believed that the rise in ‘own money’ being charged on the purchase of local cars was because of the “pent up demand” resulting from the coronavirus pandemic and the situation will return to normal as most local manufacturers were ramping up production.
Furthermore, the meeting discussed facilitating individuals who are interested in electric vehicles (EVs) through a policy intervention which could not be covered in the Electrical Vehicles Policy approved by the Economic Coordination Committee (ECC) in June 2020.
The proposal included waiver of Addtional Custom Duty (ACD) and Value Added Tax (VAT) on import of electric vehicles (EV) in CBU condition till 30 June 2025.
The ministry also proposed fiscal and financial incentives towards imports, use and manufacturing of electric vehicles in the country and Federal Cabinet has finalized these proposal which will remain in force till 30 June 2026.
Read more: Volkswagen to produce vehicles in Pakistan from 2022.
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