Islamabad: Finance Minister Shaukat Tarin announced the budget in which he mentioned the tax on domestically manufactured cars. He referred to reducing the tax rate on locally manufactured cars from 17% to 12.5%
The government also announced a significant reduction in the
sales tax for electric vehicles from 17% to 1%. He said the federal excise duty
would be removed from cars up to 850 cc, as well as the value-added tax (VAT)
shall also be removed. This was something expected from the government in the
recent budget 2021- 22. Companies that manufactured cars are not happy with the
government’s decision of imposing sale tax as the customers are discouraged due
to vehicles been heavily taxed. Even there were protests held in the lower
house of parliament.
The opposition criticized the government's decision in
Parliament, harsh words were also exchanged. I think this government action
will negatively affect the auto business.
Pakistan is a country that is already surrounded by many
financial challenges. The government wants to raise taxes to strengthen its
treasury, but on the other hand, people are constantly being taxed making it
against the fiscal policies of the government. The government argued that the
price of the product goes down as the dollar goes down, but automobile companies
did not ponder on this as they did not lower the prices of vehicles.
We have to wait and see how public opinion and business people
react to the government’s decision. Although businessmen seem unhappy with the
ongoing tax imposed by the government, since it came to power in 2018.
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