Tax collection from motor vehicle sales, registration surge 190% in FY21

Shahnawaz AkhterWeb Editor

16th Jul, 2021. 06:21 pm
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KARACHI: The collection of income tax from the sales and registration or transfer of motor vehicles registered an unprecedented growth of 190 per cent during the fiscal year 2020/21, mainly imposition of additional tax on the transfer of new motor cars without registration and uptick in the economic activities, sources said on Friday.

According to the data from Sindh Motor Vehicle Registration Authority and the manufacturers of motor cars (registered with the tax offices located in Karachi), the collection of income tax on the sales and transfers/registration had sharply increased to Rs4.23 billion in the fiscal year 2020/21, compared with Rs1.46 billion in the corresponding period of the last year.

The sources said the major growth impact came from the imposition of additional withholding tax to discourage ‘on’ [own] money introduced through the Tax Laws (Amendment) Ordinance, 2021.

To discourage ‘on’ [own] money, an additional tax of Rs50,000, Rs100,000 and Rs200,000 for vehicles up to 1000cc between 1000cc and 2000cc and beyond 2000cc, respectively, was imposed where a vehicle is sold without 90 days of its ownership. This additional tax was applicable till June 30, 2021.

“Due to [the] positive impact, it has been continued beyond June 30, 2021 through [the] Finance Act, 2021. Further, the period of 90 days has been withdrawn. Now the person buying motor vehicles would be required to get them registered in their own names, otherwise, this tax would be collected,” the Federal Board of Revenue (FBR) said in an explanation to the Finance Act, 2021.

The Regional Tax Office (RTO) Karachi, which receives withholding tax on transfers/registration collected by the Sindh Motor Vehicle Registration Authority, reported an amount of Rs2.1 billion collected during the fiscal year 2020/21, compared with Rs810 million in the preceding fiscal year, registering a growth of 160 per cent.

The Large Taxpayers Office (LTO) Karachi, which has the jurisdiction over car manufacturers for the purpose of tax assessment, reported an amount of Rs2.125 billion during the fiscal year 2020/21, compared with Rs651 billion in the preceding fiscal year, showing a growth of 226 per cent.

The sales of the locally-manufactured cars have increased 62 per cent to 181,397 units in the fiscal year 2020/21, compared with 111,965 units in the preceding fiscal year. The figures are reported by the members of the Pakistan Automobile Manufacturers Association.

However, analysts believed Pakistan’s total car sales had increased 90 per cent in 2020/2021 when the figures of non-Pama and imports are included.



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