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Budget 2024-25: Taxes on Local & Imported Cars

Jawad  12 Jun 2024   197
Budget 2024-25: Taxes on Local & Imported Cars

Budget 2024-25: Taxes on Local & Imported Cars

Today, the fiscal budget for 2024-25 was presented by Finance Minister Muhammad Aurangzeb in the National Assembly. His speech included the introduction of various new taxes and duties impacting multiple sectors, with notable changes for the automotive industry. Prior to the budget announcement, there were indications that the regulatory duty (RD) on cars with engines larger than 1800cc might rise from 70% to 100%, while a 15% duty could be applied to cars with engines up to 1800cc.

During his speech, the finance minister highlighted significant changes in the automotive sector:

Withdrawal of Import Concessions:
Aurangzeb noted the substantial difference in technology between petrol and hybrid cars, which previously justified an import concession on Custom Duty for hybrid vehicles introduced in 2013. However, with the commencement of local assembly for these cars, the concession is being revoked to support the local industry. The Federal Board of Revenue (FBR) has specified that a 50% exemption from duty and taxes applies to the import of Hybrid Electric Vehicles (HEVs) with engine capacities up to 1800cc, and a 25% exemption applies to HEVs with engine capacities from 1800cc to 2500cc.

Tax Exemptions on Electric Vehicles:
The finance minister also proposed ending the tax exemption on electric cars costing over $50,000, impacting higher-end EVs. He remarked, "The people who buy these cars can pay the taxes and duties on such vehicles."

Changes in Advance Tax:
Currently, the Advance Tax on locally assembled cars up to 2000cc is determined based on engine capacity. However, due to significant increases in car prices, the government now proposes that the tax should be based on the car's price rather than its engine capacity. This shift aims to better capture the tax potential aligned with the actual market value of the vehicles.

Future Updates
These proposals represent major shifts for the automotive industry. Further details will be provided as the government elaborates on the specifics of these tax changes.

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