Staff Reporter Islamabad
The collection of withholding tax (WHT) on registration of new cars has declined by around 39 percent in tax year 2020 due to the coronavirus pandemic that lowered the sales of locally assembled motor vehicles.
According to details released by Federal Board of Revenue (FBR), the collection of withholding tax fell to Rs5.88 billion in tax year 2020 as compared with Rs9.58 billion in the preceding tax year.
The drastic fall in revenue collection has been attributed to lower car sales that were impacted by Covid-19 and slowdown in the economy.
The annual sales of locally assembled cars posed a decline of 53 percent during fiscal year 2019/2020.
According to Pakistan Automobile Assemblers Association (PAMA), the total car sales in the country were recorded at 110,583 units during fiscal year 2019-20 as compared with 235,229 units in the preceding fiscal year.
The provincial motor vehicle registration authorities collect withholding tax on behalf of the FBR.
The withholding tax has been collected on the registration of new motor cars under Section 231B of the Income Tax Ordinance, 2001.
However, collection of withholding tax on registration and transfer of motor vehicles surged 177 percent during the first eight months of the current fiscal year, an upshot of an additional tax imposed in February 2021 to deter ‘on money’.
The collection of withholding tax on registration of new motor vehicles or transfer of ownership of a motor vehicle grew to Rs1.72 billion during July–February 2020-21.
That compared with Rs621 million in the same period of the last fiscal year.
Through the Tax Laws (Amendment) Ordinance, 2021, which was promulgated in February 2021, a new provision in Section 231B was introduced under which additional tax was imposed on first sale of new registered motor vehicles within 90 days.
