In order to stop the ‘on money’ phenomenon, the government has slapped withholding tax on unregistered new motor cars or cars sold prior to first registration.
Through the Finance Act, 2021 the tax rates have been imposed for the year 2021/2022 and onwards. Initially, these rates were imposed through the Tax Laws (Amendment) Ordinance, 2021 for a period of 90 days.
The Federal Board of Revenue (FBR) collects the withholding tax under Section 231B (2A) of the Income Tax Ordinance, 2001.
Every motor vehicle registration authority of Excise and Taxation Department shall, at the time of registration, collect tax at the rates specified in Division VII of Part IV of the First Schedule, if the locally manufactured motor vehicle has been sold prior to registration by the person who originally purchased it from the local manufacturer.
The provincial excise and taxation authorities collect tax on behalf of the FBR from persons getting new locally manufactured motor vehicles transferred in their name at the time of registration of the new motor vehicles.
WITHHOLDING TAX CARD 2021/2022
Following are the rates of withholding tax:
01. Car engine capacity up to 1000CC: the tax rate shall be 50,000; and in case the person is not on the Active Taxpayers List (ATL) the tax shall be Rs100,000.
02. Car engine capacity between 1001CC to 2000CC: the tax rate shall be Rs100,000; and in case the person is not on the ATL the rate shall be Rs200,000
03. Car engine capacity with 2001 and above: the tax rate shall be Rs200,000; and in case the person is not on the ATL the rate shall be Rs400,000
The tax collected/deducted shall be adjustable against the tax liability of the person.
