Budget 2024-25: How the New Withholding Tax Will Impact Local Car Buyers

Budget 2024-25: Government Introduces Higher Withholding Tax and Changes in Car Registration Fees

The government’s budget for 2024-25 brings several impactful changes for car buyers in Pakistan. Notably, a new proposal to increase the Withholding Tax (WHT) on cars, alongside revisions in the calculation method for car registration fees, has been introduced. These adjustments will impact both the cost of purchasing and registering vehicles, especially new cars.

Increased Withholding Tax (WHT) on New Cars

In an effort to boost revenue from the automotive sector, the government has proposed an increase in WHT for new car purchases. This change, which is part of the budget for fiscal year 2024-25, will apply across all categories of vehicles, and aims to tighten tax collection from local buyers in the auto market.

New Car Registration Fee Calculation Based on Invoice Price

One of the most significant updates in this budget is the shift in car registration fee calculations. Previously, the fee was determined based on the engine size of the vehicle, specifically for cars up to 2000cc. Under the new budget, registration charges will instead be calculated based on the invoice price of the car. This means that cars with a higher market price will incur higher registration fees, regardless of engine size.

Example: Let’s take the case of the Suzuki WagonR, which has an approximate invoice price of 3.8 million PKR. Under the previous calculation method, a car buyer would have paid around 20,000 PKR in registration charges. With the new budget changes, however, registration charges for this vehicle would now rise to about 38,000 PKR.

Removal of Custom Duty Concession on Hybrid Electric Vehicles (HEVs)

In a move likely to impact environmentally conscious consumers, the budget also abolishes the 50% concession on customs duties for Hybrid Electric Vehicles (HEVs). Previously, owners of HEVs benefited from a reduced customs duty rate, paying only half the standard rate. Now, HEV buyers will be required to pay the full 100% customs duty, eliminating the former incentive.

Example: Imagine an HEV with an engine size of 1,500cc, where the total customs duty amounts to 1 million PKR (roughly 30% of the vehicle’s price). Under the old policy, buyers would have paid 25% of the vehicle’s cost in duty, thanks to the concession. With the new budget, this discount has been removed, meaning buyers must now pay the full customs duty on HEVs.

Impact on Car Buyers

The budget’s new tax structure introduces notable financial considerations for prospective car buyers in Pakistan. With WHT hikes and adjustments in registration fees, buyers should expect higher upfront costs for both traditional fuel and hybrid vehicles.

These budgetary changes could influence car-buying decisions, particularly for HEV buyers who previously benefited from reduced duty rates. As a result, it’s essential for consumers to carefully evaluate the financial implications of these new tax measures when considering a new car purchase.