Sales Tax Remains Unchanged for Local Hybrid Cars

Jawad

26 Jun 2024

268

Sales Tax Remains Unchanged for Local Hybrid Cars

Earlier, we informed you about a proposed secret attack on the locally assembled Hybrid Electric Vehicles (HEVs) by the government. The plan was to hike the General Sales Tax (GST) on these vehicles from the current 8.5% to 25%. This news came as a shock to local car manufacturers, who have collectively invested around $100-125 million in Pakistan to develop this technology. Companies like Toyota, Sazgar Engineering (Haval), and Hyundai, which are currently producing local hybrids, protested and appealed for a reversal of this decision.

Industry Concerns on Sales Tax Increase

The issue was raised during a Standing Committee on Finance meeting, where it was argued that such a significant tax increase would hinder the production progress of HEVs in Pakistan and negatively impact future investments. The Industry and Production Ministry, in a letter, underscored the substantial investments made by major auto manufacturers like Toyota, Hyundai, and Sazgar (Haval) under the Automotive Industry Development and Export Plan (AIDEP). It also noted that other companies, including Honda, Suzuki, and Kia, had plans to enter the HEV segment. The letter cautioned that imposing higher taxes without consultation would not only affect current investments but also deter future ones in HEV technology.

Additionally, the ministry pointed out that this move contradicted the objectives of the National Climate Change Policy and Renewable Energy Policy. They urged the government to revert the sales tax to the original 8.5% as stipulated in the AIDEP 2021-26. During the meeting, the Federal Board of Revenue (FBR) assured that they would review the decision.

Finance Minister's Announcement

In a recent speech at the National Assembly, Finance Minister Muhammad Aurangzeb announced that the reduced sales tax rate of 8.5% would continue to apply to HEVs listed in Schedule 8 and Serial No 73. This announcement provided relief to local companies, as the prices of locally assembled hybrid cars would remain stable. Had the government implemented the increased GST rate, the prices of local HEVs would have surged significantly.

Uncertainty on Imported Used Hybrids

The situation regarding the tax relief on imported used hybrid cars remains unclear. We will provide updates as soon as more information becomes available.

Hybrid car tax Sales tax relief Local hybrids GST rollback Tax freeze Hybrid vehicle Auto industry Tax exemption Government decision Car manufacturers

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