Local Car Prices May Rise in Pakistan Due to Potential Sales Tax

• The ECC approved a proposal to raise the sales tax on locally made vehicles.
• The decision was made during a meeting led by Federal Minister for Finance,.
• The ECC standardized the criteria for implementing a higher 25% sales tax rate.

The Economic Coordination Committee (ECC) of the Cabinet has approved a proposal from the Federal Board of Revenue to increase the sales tax rate on vehicles made or assembled locally.

During a meeting led by Federal Minister for Finance, Revenue, and Economic Affairs, Dr. Shamshad Akhtar, a decision was made to increase the sales tax rate on locally manufactured or assembled vehicles. Other attendees included ministers such as Fawad Hasan Fawad, Gohar Ejaz, Mohammad Ali, Sami Saeed, and Shahid Ashraf Tarar.

The ECC thoroughly discussed and ultimately approved the proposal to standardize the criteria for implementing a higher 25% sales tax rate on locally manufactured or assembled vehicles.

The anticipated outcome of this action is a subsequent rise in the prices of locally manufactured vehicles, which have already experienced a decrease in sales during the initial seven months of the fiscal year 2023–24.

The decision particularly targets vehicles categorized under Pakistan Customs Tariff Code 87.03, encompassing “motor cars and other motor vehicles primarily designed for passenger transport, including station wagons and racing cars.”

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As per a social media user, this ruling is likely to affect vehicles with engine capacities exceeding 1000 cc, previously subject to an 18% tax rate. Models like the Honda City, Civic, Toyota Yaris, and Toyota Corolla are anticipated to experience price increases once the new criteria are formally endorsed by the federal government.