Govt announces reduction in sales tax on locally manufactured vehicles

Tarin said small cars up to 850 CC have been exempted from levy of federal excise duty

ISLAMABAD (Dunya News) – Federal Minister for Finance and Revenue Shaukat Tarin on Friday announced a reduction in sales tax on locally manufactured vehicles in the budget for the next financial year 2021-22.

In his budget speech, Tarin said it is proposed that small cars up to 850 CC capacity be exempted from levy of federal excise duty besides reducing sales tax rate from 17 percent to 12.5 percent and withdrawing value added tax. He said the government is encouraging manufacturing and use of electric vehicles.

The minister for the purpose, various tax exemptions and concessions were proposed, which include tax exemption on import of CKD kits for local manufacturing of electric vehicles, reduction in sales tax rate on locally manufactured electric vehicles from 17 percent to one percent, withdrawal of value addition tax on import of electric vehicles and CKD kits and withdrawal of federal excise duty on 4-wheelers electric vehicles.

He said that manufacturers of existing vehicles and new models are being exempted from advance customs duty. Exemption from federal excise duty and reduction in sales tax on locally manufactured in being given on vehicles up to 850cc.

He said the government was encouraging the manufacturing and use of electric vehicles to address environmental issues and reduce reliance on gasoline besides provision of cheaper source of transportation to public.

The minister said that the sales tax rate on locally manufactured vehicles was being reduced from 17% to 12.5% and value added tax on locally manufactured vehicles was being abolished. “It has been decided to reduce the sales tax rate for electric vehicles from 17 per cent to one per cent and reduce the customs duty for one year,” he said.