FBR explains changes in advance tax on motor vehicles

FBR explains changes in advance tax on motor vehicles

ISLAMABAD: The Federal Board of Revenue (FBR) has explained changes made to advance tax on motor vehicles through Finance Act, 2022.

The FBR issued Income Tax Circular No. 15 of 2022/2023 to explain important amendments brought through Finance Act, 2022 to the Income Tax Ordinance, 2001.

The FBR said that provision of section 231B of Income Tax Ordinance, 2001 was limited to private motor vehicles. The scope of withholding tax has now been enhanced though omission of the word ‘private’ from the heading and elsewhere in the section.

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Further, an inclusive definition of motor vehicle has been provided in the substituted sub-section (7) of section 231B with following exclusions:

(i) a motor vehicle used for public transportation, carriage of goods and agriculture machinery;

(ii) a rickshaw or a motorcycle rickshaw and

(iii) any other motor vehicle having engine capacity up to 200cc.

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Except motor vehicles mentioned at i, ii and iii above, provision of section 231B will apply on motor vehicles of all makes and models irrespective of its private or commercial use by the end users.

The FBR further said that the withholding tax amount required to be collected at the time of purchase or registration of motor vehicle has been enhanced with engine capacity of 1601cc and above.

In cases of electric vehicles where engine capacity of a vehicle is not available and value of vehicle is rupees five million or more, the amount of tax collected will be 3 per cent of import value as increased by customs duty, sales tax and federal excise duty in case of imported vehicles or invoice value in case of locally manufactured or assembled vehicles.

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Rates of tax required to be collected at the time of transfer of registration or ownership of a motor vehicles have been provided in clause (2) in the Table in Division VII of Part IV of First Schedule of the Ordinance.

A new proviso has been inserted whereby a vehicle in which engine capacity is not applicable (electric vehicles) and the value of said vehicle is rupees five million or more, then tax amount of rupees twenty thousand will be collected at the time of transfer of registration or ownership of such vehicle.

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In case of a person not appearing in active taxpayer list, tax collectible under this section will increase by two hundred percent. Necessary change has been incorporated in rule 1 of Tenth Schedule of the Ordinance, the FBR added.

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