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Economy

FBR’s Bold Move: 25% Sales Tax Imposed on Luxury Local Vehicles

Vehicles

The Federal Board of Revenue (FBR) has introduced a significant policy shift by imposing a 25% sales tax on locally manufactured or assembled vehicles, following a revision in the federal government’s classification of such automobile goods.

The decision, disclosed on Friday through the issuance of SRO 370(I)/2024, marks an amendment to the earlier SRO 297(I)/2023.

Under the revised regulations, the 25% sales tax will be applicable to locally manufactured or assembled vehicles featuring an engine capacity of 1400cc or more and a price exceeding Rs 4 million (excluding sales tax). This categorization also includes double cabin (4×4) pick-up vehicles.

A pivotal change is reflected in the amendment’s impact on the PCT code 87.03, previously associated with locally produced or assembled SUVs and CUVs. Now, this code will encompass vehicles manufactured or assembled locally with an engine capacity of 1400cc and above.

Furthermore, the scope of PCT code 87.03 extends to locally produced or assembled vehicles priced above Rs 4 million, excluding sales tax.

Meanwhile, PCT code 87.04, relevant to locally produced or assembled double cabin (4×4) pick-up vehicles, remains unaffected by the recent amendment.

The FBR justifies this tax rate alignment by asserting its consistency with charges imposed on certain imported goods and their subsequent supply or retail prices.

This strategic move by the FBR indicates a deliberate effort to enhance revenue streams while concurrently addressing the growing luxury vehicle market.

The newly implemented sales tax targets high-end automobiles, particularly those with larger engine capacities and elevated price points, as the government seeks to balance fiscal considerations and economic priorities.

The amendment underscores a meticulous approach to taxation policies, ensuring alignment with contemporary market dynamics and fiscal goals.

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