Non-filers allowed motor vehicle purchase on enhanced tax rates

Non-filers of income tax return have been allowed to purchase motor vehicle on enhanced tax rates, according to a federal minister of Pakistan.

In a strategic move aimed at bolstering revenue generation during the current fiscal year, the Pakistani government has decided to lift the ban on non-filers, allowing them to purchase motor vehicles. Finance Minister Asad Umar addressed the floor of the house on Wednesday, presenting the Finance Supplementary (Second Amendment) Bill of 2019. The bill introduces a series of amendments, permitting non-filers to acquire motor cars with an engine capacity of up to 1300 CC. However, this relaxation comes with an accompanying adjustment in withholding tax rates on the purchase and transfer of motor vehicles for non-filers.

The pivotal amendment is made to Section 227C of the Income Tax Ordinance of 2001 through the Finance Supplementary (Second Amendment) Bill. This section, initially introduced in the Finance Act of 2018, placed restrictions on non-filers, preventing them from purchasing motor vehicles and immovable property valued above Rs5 million. The proposed changes now exempt the following from the purchase restriction:

Locally manufactured motor vehicles with an engine capacity not exceeding 1300 CC.

Locally manufactured motorcycles, motorcycle rickshaws, and rickshaws.

Locally manufactured agricultural tractors.

While this move expands opportunities for non-filers to enter the motor vehicle market, the government is concurrently tightening its grip on tax regulations. The Finance Supplementary Bill proposes an increase in advance tax rates on the purchase, registration, and transfer of motor vehicles under Section 231B for non-filers. This strategic adjustment aims to balance the relaxation in purchasing restrictions with an enhancement in revenue collection from this segment of the market.

The decision to allow non-filers access to certain categories of motor vehicles reflects a nuanced approach by the government, recognizing the potential contribution of this sector to economic growth. By targeting specific engine capacities and locally manufactured vehicles, the government seeks to strike a balance between revenue generation and market inclusivity.

Finance Minister Asad Umar underscored the importance of these measures in his address, emphasizing the government’s commitment to fiscal prudence and economic sustainability. The amendments are aligned with broader economic goals, striking a delicate equilibrium between facilitating market activity and ensuring adequate tax contributions.

As the Finance Supplementary (Second Amendment) Bill progresses through the legislative process, industry stakeholders, and the general public will closely monitor its impact on the automotive sector and overall revenue figures. The government’s dual approach of opening avenues for non-filers while simultaneously adjusting tax rates reflects a dynamic strategy to navigate the intricate landscape of fiscal policy in Pakistan.