The government of Pakistan has raised the advance income tax on the registration of vehicles above 2000cc as part of the amended Finance Bill 2023. The revised bill imposes a fixed tax rate on both imported and locally manufactured vehicles ranging from 2001cc to over 3000cc.
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Under the new income tax slabs, vehicles with an engine capacity of 2001cc to 2500cc will be subject to a fixed tax rate of 6 percent based on the vehicle’s value. For vehicles with an engine capacity of 2501cc to 3000cc, the fixed tax rate will be 8 percent. The highest tax rate of 10 percent will be applicable to vehicles with an engine capacity above 3000cc.
The collection of advance tax on motor vehicles is governed by section 231B of the Income Tax Ordinance 2001. The Excise and Taxation Department, as the motor vehicle registering authority, is responsible for collecting advance tax at the time of vehicle registration or transfer of ownership. However, no advance tax will be collected on vehicle transfers occurring after five years from the initial registration date in Pakistan.
Additionally, if a locally manufactured motor vehicle is sold prior to registration by the original purchaser from the local manufacturer, the registering authority will collect tax at the specified rates at the time of registration.
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Manufacturers of motor vehicles are also required to collect advance tax at the specified rate at the time of sale for motor cars or jeeps.
These revisions in advance income tax on vehicle registration aim to generate additional revenue for the government and encourage the purchase of vehicles with smaller engine
