The Federal Board of Revenue (FBR) has commenced the recovery of Capital Value Tax (CVT) on motor vehicles for the past five years, despite the fact that the levy was applicable from July 01, 2022.
The Regional Tax Office (RTO) in Karachi has confirmed that the tax office has initiated the recovery process and has requested the Excise and Taxation Department of Sindh Province to collect the CVT on its behalf. Notices for the recovery of CVT for the past five years have been issued by the Excise and Taxation Department.
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The imposition of CVT on locally assembled and imported motor vehicles was introduced through the Finance Act of 2022. The FBR has provided guidelines for determining the value of motor vehicles for the purpose of CVT.
For imported vehicles, the value is assessed by Customs authorities and includes all duties and taxes levied at the import stage. The CVT is collected by the Collector of Customs at the time of import. For vehicles manufactured or assembled locally in Pakistan, the ex-factory price inclusive of all duties and taxes is considered, and the responsibility of collecting CVT lies with the local manufacturer or assembler.
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In cases of sale by public auction or auction by tender, the auction value inclusive of all duties and taxes is used, and the person conducting the auction is responsible for collecting CVT. The value of motor vehicles decreases by ten percent each year, and no CVT is collected after five years from the end of the financial year in which the motor vehicle was imported, auctioned, or locally purchased.
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CVT on motor vehicles is collected at the time of import, purchase from local manufacturers or assemblers, and auction. The Motor Vehicle Registration Authority of the Excise and Taxation Department is responsible for collecting CVT at the time of registration of a motor vehicle, effective from July 1, 2022, unless CVT has already been collected from the same person during the import, purchase from a local manufacturer, or at the auction stage for the same motor vehicle. Additionally, CVT is collected by the Motor Vehicle Registration Authority when there is a transfer of registration or ownership of a motor vehicle. This means that CVT is collected on every subsequent sale or transfer of a motor vehicle occurring within the prescribed five-year period.
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The FBR’s initiation of CVT recovery on motor vehicles for the past five years marks a significant step in enforcing tax compliance. The Excise and Taxation Department of Sindh Province is working in collaboration with the FBR to collect the outstanding CVT amounts. This move is aimed at ensuring that individuals fulfill their tax obligations related to motor vehicles.
