Advance tax on new cars over 1600cc to double – budget 2022-23

The government has presented the national budget 2022-23 and as predicted the government has proposed 200pc advance tax on new cars having above 1600cc engines. By over 1600cc, the government means any locally produced car that has an engine capacity of 1601cc and above. Cars that are 1600cc and less will not ne affected by this new proposed double tax.

The tax has been doubled, that is a 100pc increase in the advance tax, for the non-filers. Keep in mind this tax will go directly to the government and will not have any effect on the ex-factory price of the vehicle. Advance tax is taken from you when you purchase a brand new locally produced car. It is also known as with-holding tax and is usually adjustable when a customer files their annual taxes.

Here are the slabs and the new proposed tax.

For Non-filers

1601cc to 1999cc 2000cc to 2499cc 2500cc and above

Current Tax

Rs150,000 Rs300,000

Rs400,000

Proposed Increase Rs300,000 Rs600,000

Rs800,000

The customers of EV vehicles will also be paying 2pc additional advance tax. 

Almost half of the carmakers in Pakistan halted the booking of new vehicles in these last couple of weeks. That was mainly because of the increasingly depreciating Pakistani rupee as well as the looming budget. Now the budget has been presented, the picture will hopefully get clearer. 

Most of the new Chinese vehicles having 1500cc turbo engines will now become more attractive since they won’t be affected by the new proposed tax. Changan Oshan. Haval H6 and Jolion, MG HS and ZS, Proton X70, DFSK Glory, all are 1500cc turbocharged locally assembled cars. Honda Civic and City both have smaller engines as well.

But these cars will be subjected to a 2pc capital value tax in case their price is above 5 million PKR.

On the other hand, Korean cars like Kia Sportage, Sorento, and Carnival, along with Hyundai Tucson as well as Hyundai Elantra 2.0 and Sonata, with Toyota Corolla Grande, Revo and Fortuner all having 2000cc and above engines will be hit by this new tax. Also include BAIC BJ40 Plus in the list since it comes with a 2L engine. It will be interesting to see if the new tax is going to affect the sales of these vehicles as well or not. 

For now, the new budget has only be presented for a debate in the national assembly. Only after the debate it will be approved. These new taxes might be amended during the debate. There already is a ban on imports of CBUs imposed the current government. Let’s see how the events unfold and will the new budget improve or decrease the affects of current auto policy.

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