Tax Hike on EVs & CKD Cars in Finance Act 2023

04 Jul 2023

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Tax Hike on EVs & CKD Cars in Finance Act 2023

The Finance Act 2023 has brought about significant changes in the tax landscape, particularly concerning completely knocked down (CKD) cars and the registration of electric vehicles (EVs). In this article, we will explore the key amendments introduced by the act and their implications.

Tax Rates for EVs & CKDs

The Finance Act 2023 has introduced new tax rates for EVs and CKDs. According to tax experts, a 3% advance tax will be collected at the time of registration for EVs valued at Rs. 5 million or more, irrespective of engine capacity. This conclusion has been inferred from the provided criteria, as the act does not explicitly mention EVs. In the case of CKDs, all customers will be subject to a 4% tax instead of the previous 3%. This increase applies to CKDs regardless of conditions such as engine capacity or income.

Tax Calculation for Motor Vehicles

The Finance Act 2023 outlines the method of calculating the value of motor vehicles based on various factors. For imported vehicles, customs authorities assess the value, which includes customs duty, federal excise duty, and sales tax paid during the import stage. On the other hand, for vehicles manufactured or assembled locally, the invoice value, inclusive of all duties and taxes, is considered. In the case of auctioned vehicles, the value is determined by the auction price plus applicable duties and taxes.

Changes in Income Tax Slabs

The Finance Act 2023 introduces revised income tax slabs that impact the fixed tax rate for vehicles based on their engine capacities. The updated slabs are as follows:

Engine Capacity 2001cc to 2500cc: Vehicles falling within this range will be subject to a fixed tax rate of 6% of the vehicle's value.

Engine Capacity 2501cc to 3000cc: Vehicles within this range will have an 8% fixed tax rate.
Engine Capacity Above 3000cc: For vehicles with engine capacities exceeding 3000cc, the fixed tax rate has been set at 10% of the vehicle's value.

Ambiguity Surrounding EV Registration Tax Rates

While the Finance Act 2023 brings clarity to the tax rates for motor vehicles, there remains ambiguity regarding the specific tax rates for electric vehicle registration. Experts continue to discuss and debate the exact tax rates applicable to EVs. However, based on projections, the government aims to encourage the adoption of environmentally friendly transportation options by setting a projected rate of 3% for EVs valued at Rs. 5 million or more.

Finance Act 2023 Fixed Tax 2023 New Fixed Tax 2023 Fixed Tax Cars 2023

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