Yesterday, the federal government passed Finance Bill 2023 and for automobile industry, there was one major update. The government has imposed a New Fixed Tax on both locally assembled and imported cars above 2001cc. As per details:

• 6% tax will be imposed on the value of vehicles with engine capacities from 2001cc to 2500cc.
• Vehicles with engine capacities from 2501cc to 3000cc will face an 8% tax based on their value.
• Vehicles with engine capacities exceeding 3000cc will be subject to a 10% tax based on their value.

How Will it Work? 

As per media reports, the Customs department will evaluate the import value of cars with engine capacities exceeding 2001cc. This import value will be used to determine the applicable Customs Duty, Federal Excise Duty (FED), and Sales tax.

For both Completely Built-up (CBU) and locally assembled cars with engine capacities above 2001cc, the invoice value, which includes all duties and taxes, will be taken into consideration.

In situations where the engine capacity is not relevant, and the value of vehicles is Rs. 5 million or higher, a tax rate of 3% will be imposed on the import value (including the revised Customs Duty, FED, and Sales tax for imported vehicles) or the invoice value (for locally assembled vehicles).

If a locally manufactured vehicle is sold by the original purchaser before registration, the motor vehicle registering authority will levy taxes at the specified rates during the registration process. Moreover, manufacturers of motor vehicles are required to collect advance taxes from buyers at the specified rate during the sale of motor cars or jeeps.

Expected Price Jump in Locally Assembled Cars

After the calculation, here are expected jumps in prices of locally assemblers cars above 2001cc.

Note: We would like to mention once again that these are our calculations as there is no update from car companies regarding it. Hence, these numbers may differ from the official announcements of companies. Furthermore, there is still unclarity about the tax imposition on filers and non-filers. Like every other duty or tax, it would take sometime for the picture to get cleared. So, keep your seatbelts fastened and wait for the clarity.