The Federal Board of Revenue (FBR) suggested raising the Federal Excise Duty (FED) on both domestically produced and imported motor vehicles last week, as we told you. To add more money to the future “mini-budget,” the institution seeks to propose the increase by enacting the Tax Laws Amendment Ordinance.
According to recent media reports, FBR has suggested a new car tax to raise money. These sources claim that the government intends to impose a new Capital Value Tax (CVT) on vehicles that are both imported and locally produced. To meet the demands of the International Monetary Fund (IMF), the government hopes to raise Rs. 10 billion through this new tax. In order to discuss the IMF delegation’s present visit to Pakistan for talks to release the
Capital Value Tax On Cars
If we talk about the CVT, it was imposed by the government on both imported and domestically made cars in three stages. A new car tax was revealed in the Finance bill 2022. The government reportedly levied 2% CVT on vehicles costing more more Rs. 5 million, according to the article (50 lacs). However, after a month, FBR lowered the tax on automobiles costing more than Rs. 5 million to 1%.
FBR also made the process for evaluating vehicles public. The manufacturer-determined value was used to determine the worth of vehicles made in Pakistan. The value for imported autos was established by customs officials and includes customs fees.
If an automobile is sold at auction, its value is determined by the auction price. In all other circumstances, the total amount paid to buy, modify, or improve the vehicle was taken into account when determining its final worth. The Finance Bill 2022 included provisions for accounting for automobile depreciation. The value of the motor vehicle in question had to be reduced by 10% annually starting at the conclusion of the fiscal year in which it was purchased.
The tax was collected by the Customs authority when the automobiles were imported. When buying an automobile made locally, the buyer must pay tax based on the vehicle’s sale price to the local manufacturer or assembler.
Change in CVT on cars
However, there was another change in the implication process of CVT on cars. From July 2022, CVT was imposed on:
- Cars with an engine size above 1300cc
- Electric vehicles with battery power above 50kwh
The government finished the condition of Rs. 5 million but included more cars in the tax net. There are no reports on what percentage of CVT will be imposed or on which segment of cars will be affected, but there are solid chances that it will be increased.
