The Lahore High Court has ruled that the auto parts replaced under the warranty given by the manufacturers are not taxable as the cost of the replacements is incorporated in the original price of the vehicle that already includes the sales tax.
A two-judge bench headed by Justice Shams Mahmood Mirza reached this conclusion, allowing a sales tax reference by M/s Honda Atlas Cars (Pakistan) Ltd against a judgement of the Appellate Tribunal Inland Revenue of the Federal Board of Revenue (FBR).
The applicant, a car manufacturer, received a show cause from the additional collector (Legal), Large Taxpayers Unit, Lahore, alleging evasion of sales tax under different heads, including the “supply” of auto parts against the warranty claims.
The tribunal upheld the stance of the department, dismissing an appeal of the manufacturer.
