The caretaker government has taken a sudden step, which will directly increase the prices of all cars costing Rs. 40 lacs and with engine capacity below 1,400cc, as General Sales Tax (GST) on them is increased from 18% to 25%. It is pertinent to mention that 25% GST or Luxury Tax is already implemented on cars above 1,400cc.

Decision by ECC

According to media reports, on Wednesday, the Economic Coordination Committee (ECC) accepted the proposal of “Rationalization of Criterion of Enhanced Rate of 25% Sales Tax on Locally Manufactured/Assembled Vehicles.” Explaining the new tax, economist Ali Khizer told PakWheels.com that any vehicle above Rs. 40 lacs will be considered a luxury vehicle and be taxed at 25%. “Hybrid and electric vehicles (EVs) are excluded from this new tax net,” he said.

Meanwhile, analyst Abdul Rehman tweeted: “Any 1000cc+ car is now a luxury in Pakistan as ECC has approved 25% sales tax instead of 18% for all cars valued above Rs40 lac.”

He further explained that earlier, a 25% luxury tax was applicable on 1400+cc cars.

Any 1000cc+ car is now a luxury in 🇵🇰🇵🇰

ECC has approved 25% sales tax instead of 18% for all cars valued above Rs40 lac.

Earlier, 25% luxury tax was applicable on 1400+cc cars.

— Abdul Rehman (@AbdulRehman0292) February 15, 2024

Official Notification 

The official statement by the Ministry of Finance does mention that the proposal was passed yesterday. However, there are no details of the new policy and how it will be implemented.

The Federal Minister for Finance, Revenue, and Economic Affairs, Dr. Shamshad Akhtar presided over a meeting of the Economic Coordination Committee (ECC) of the Cabinet at Islamabad dated February 14th, 2024. pic.twitter.com/AjBUV9EOB4

— Ministry of Finance, Government of Pakistan (@Financegovpk) February 14, 2024

PakWheels.com also contacted officials in the Federal Board of Revenue (FBR) and Engineering Development Board (EDB) to ask about the details,, however, they told us that they would only be able to share the details after the release of official notification. This means that the proposal has been passed, but we have to wait for the official notification to get more clarity.

Cars to be Impacted

If 25% GST is implemented on cars above Rs. 40 lacs and engine capacity below 1,400cc, then the prices of these cars will be increased in the coming days.

• Suzuki Cultus VXL (Rs. 4,084,000)
• Suzuki Cultus Auto Gear Shift (Rs. 4,366,000)
• Suzuki Swift GL Manual (Rs. 4,336,000)
• Suzuki Swift GL CVT (Rs. 4,654,000)
• Suzuki Swift GLX CVT (Rs. 5,040,000)
• Toyota Yaris GLI MT 1.3 (Rs. 4,399,000)
• Toyota Yaris ATIV MT 1.3 (Rs. 4,659,000)
• Toyota Yaris GLI CVT 1.3 (Rs. 4,689,000)
• Toyota Yaris ATIV CVT 1.3 (Rs. 4,899,000)
• Toyota Yaris AERO CVT 1.3 (Rs. 5,099,000)
• Honda City 1.2L M/T (Rs. 4,699,000)
• Honda City 1.2L CVT (Rs. 4,829,000)
• Proton Saga 1.3L Ace A/T (Rs. 4,099,000)

Note: These are the current ex-factory prices of these cars and their variants.

We want to mention once again that the whole situation will be clearer after the official notification. The car companies will also revise the prices after that; till then, keep your fingers crossed and wait for an official statement.

What is your take on this new 25% GST tax on cars above Rs. 40 lacs? Please share your thoughts with us in the comments section.