Pakistan's Finance Minister Introduces New Vehicle Tax System

The federal government in Islamabad has recently announced a significant change in the way advance income tax will be collected for vehicle purchase and registration. This decision, proposed by Pakistan's Finance Minister as part of the budget for 2024-25, involves shifting from the current practice of determining taxes based on engine capacity to a new system based on the price of vehicles.

Until now, taxes for vehicles up to 2000cc were calculated according to their engine capacity. However, under the new proposal, taxes will be determined based on the ex-factory price of the vehicles. This change is set to impact a wide range of vehicles, from 660cc to 2,000cc, and is aimed at streamlining the tax collection process and ensuring a fairer system.

The shift to calculating withholding tax on cars based on their ex-factory price marks a significant departure from the previous method. By aligning taxes with the price of vehicles, the government aims to create a more transparent and efficient tax collection mechanism. This change is expected to have implications for both car buyers and the automotive industry as a whole.

The decision to change the method of collecting advance income tax for vehicle purchase and registration reflects the government's commitment to modernizing the tax system and promoting fairness in taxation. As this new system comes into effect, it will be important for stakeholders to adapt to the revised tax structure and understand its implications on vehicle pricing and ownership.