Budget 2021/2022: Duty, taxes abolished on cars up to 850cc

Budget 2021/2022: Duty, taxes abolished on cars up to 850cc

ISLAMABAD: The government has announced abolishing duty and taxes on locally manufactured and imported cars with engine capacity up to 850cc to enable low earning families to afford motor vehicles.

Finance Minister Shaukat Tarin while presenting federal #budget 2021/2022 on Friday announced duty and tax incentives for sale and import of motor cars with engine capacity up to 850cc.

The finance minister made following announcement:

Withdrawal of FED and Reduction in Sales Tax on Locally Manufactured cars up to 850 cc: Rising prices of locally manufactured small cars is a major concern for low earning families. Accordingly, it is proposed that small cars upto 850 cc capacity may be exempted from levy of FE besides reducing Sales Tax rate from 17% to 12.5% and withdrawing value added tax.

Exemption from Withholding Tax on Import: It is proposed that no tax may be collected on imports of books, journals, agriculture equipment and motor vehicles in CBU condition upto 850 cc.

To incentives this sector further additional custom duty and regulatory duty on CBU import of vehicles upto 850cc are being exempted.

Whereas relief to existing manufacturing industry and new models is also being provided by removing Additional Customs Duty (ACD) and rationalizing the tariff structure.

Due to these targeted interventions the middle class of this country will be able to afford a car of this specific category and will accrue the benefits of governments flagship projects of “Meri Gari Scheme” which will enable many countrymen who wish to graduate from motorcycle to own their car by providing small car at an affordable price.

Moreover further incentives in the form of reduction of customs duties are also being provided to electric vehicles for one year to promote the culture of electric vehicle in Pakistan.

Similarly, keeping in view the changing international motorcycles trend usage of local manufacturing of heavy motorcycles and specific categories of trucks and tractors are also being incentivised by rationalizing the tariff structure.

Tax Incentives for promoting electric vehicles: To address environmental issues, reduce reliance on gasoline and provide cheaper source of transportation to public, Government of Pakistan is encouraging the manufacture and use of electric vehicles.

For this purpose, various tax exemptions and concessions are being proposed, which include tax exemption on import of CKD kits for local manufacturing of electric vehicles, reduction in sales tax rate on locally manufactured electric vehicles from 17% to 1%, withdrawal ofvalue addition tax on import of electric vehicles and CKD kits and withdrawal of federal excise duty on 4-wheelers electric vehicles.