Tax reduction on small and electric cars

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.