Car prices likely to go down as Pakistani govt mulls cut in taxes


ISLAMABAD – The prices of both new imported and locally assembled cars of up to 800cc engine power are likely to come down later this year as the government is mulling over tax relaxations for the auto sector in the federal budget 2021-22 that will be unveiled this month.

The government aims at facilitating the middle class by bringing small cars within their purchasing capacity.

A proposal seeks a reduction in import duties and taxes on new imported cars by up to 63% and around 7% for locally assembled vehicles, according to a media report.

A final recommendation about abolishing or cutting duty and taxes on new imported cars of up to 800cc will be sent to the government after the proposal is fine-tuned today.

Currently, the taxes and duties on new imported cars of up to 800cc nearly stand at 132% of the actual price of the vehicle. They will drop by 63% if the proposal, which is under consideration, is accepted by the government.

The prices of the imported cars of up to 800cc may cut by Rs300,000 to Rs400,000 if the proposal is is implemented.

The government had been imposed high taxes and duties on imported vehicles in order to save the local assemblers, which according to consumers are charging higher prices of their products in Pakistan.

The government is also considering reducing GST rate, abolishing 2.5% federal excise duty and other relaxations for the locally-assembled cars of up to 800cc.

Last month, Federal Minister for Industries & Production Makhdum Khusro Bakhtyar had sought suggestions from leading bodies of Pakistan’s auto sectors to reduce the prices of small cars to bring the cost down within the affordability of the lower middle class of the country.

He asked for suggestions during a consultative session with representatives of the Pakistan Automotive Manufacturers Association (PAMA) and the Pakistan Association of Auto Parts & Accessories Manufacturers (PAAPAM) separately.

Mr. Razzak Dawood, Advisor on Commerce, Trade & Investment and Secretary Industries & Production Mr. Sohail Rajput also joined the meeting.

This meeting aimed to discuss the proposals submitted by both associations for Auto Industry Development & Export Plan (AIDEP), 2021-26.

The minister indicated that the new policy would focus on further growth & development of the automotive industry together with affordability, quality, availability, and indigenization of industry.

He further highlighted that the government would like to see an increased footprint of Electric Vehicles to improve the environment and to reduce oil import bill.

Both Associations lauded the efforts of the government to formulate the policy as universally accepted by key players.

The bodies also commended the current government for support in the tough times of the Pandemic through salary loan, investment loans and slashing down interest rates to protect the industry. At the end, the forum decided to hold the consultative sessions till finalization of AIDEP draft.

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