New Tax Soon on Locally Made Vehicles

03 Jun 2023

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New Tax Soon on Locally Made Vehicles

The Pakistan Automotive Manufacturers Association (PAMA) has expressed concerns over the proposed implementation of the Withholding Tax (WHT) on domestically produced automobiles. The federal government is considering a shift in the basis for calculating WHT from engine capacity to invoice price in the upcoming budget. This potential change has raised apprehension within the struggling auto industry, leading PAMA to caution against the detrimental consequences that could arise. In a letter to the Chairman of the Federal Board of Revenue (FBR), PAMA highlights the negative impact this shift would have on vehicle sales and calls for the retention of the current engine-based WHT system. The customers can get the detailed information that New Tax Soon on Locally Made Vehicles.

The Implications of the Proposed Change:

PAMA emphasizes that altering the basis of WHT from engine capacity to invoice price would inevitably result in an increased tax burden on locally produced vehicles. Consequently, this would lead to higher retail prices for consumers. The association expresses concerns over the potential negative repercussions this change could have on the sales of domestically manufactured automobiles. With the auto industry already facing challenges such as import restrictions and economic uncertainties, the proposed tax modification adds another layer of complexity and potential hardship.

PAMA's Appeal for Retention of Current Tax System:

In its letter to the FBR, PAMA urges the authorities to reconsider the proposed WHT alteration and emphasizes the need to reduce the current engine-based tax on vehicles. The association highlights the adverse impact of import restrictions and the subsequent decline in the industry during the COVID-19 years of 2019-20 and 2020-21. However, it also points out that the auto sector had shown signs of revival during the following fiscal year, 2021-22. Unfortunately, the industry experienced a sharp downturn in 2022-23, primarily attributed to import restrictions and other macroeconomic challenges.

The Burden of Losses:

PAMA underscores the significant financial losses incurred by its members, amounting to billions of rupees. The combination of import restrictions, skyrocketing inflation, and other macroeconomic factors has created a challenging business environment for automotive manufacturers. These losses not only affect the companies themselves but also have a cascading impact on the overall industry, including the workforce, suppliers, and dealerships.

The proposed shift in the basis for calculating Withholding Tax on locally produced automobiles has raised concerns within the auto industry. PAMA's warning about the detrimental consequences of such a move highlights the fragility of the sector, which has already been grappling with challenges in recent years. As the government prepares to present the upcoming budget, careful consideration must be given to the potential ramifications of this tax alteration on the struggling automotive sector. It is crucial to strike a balance that supports the industry's growth and sustainability while ensuring fair taxation policies.

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