The government has revamped vehicle tax rates in the recently amended Finance Bill 2023, significantly affecting the auto industry. The new tax framework involves a stepped increase in the tax rate based on the engine capacity of vehicles.
Under the new tax regime, vehicles with engine capacities of up to 850cc will attract a tax of Rs. 10,000. Vehicles falling in the 851cc to 1000cc range will be subject to a Rs. 20,000 tax, while a tax of Rs. 25,000 will be imposed on vehicles within the 1001cc to 1300cc bracket.
Vehicles with engine capacities between 1301cc and 1600cc will be levied a tax of Rs. 50,000. Those within the 1601cc to 1800cc range will face a Rs. 150,000 tax, and Rs. 200,000 will be levied on vehicles in the 1801cc to 2000cc category.
The tax structure extends beyond these brackets, with a 6% tax on the value of vehicles ranging from 2001cc to 2500cc, an 8% tax on vehicles in the 2501cc to 3000cc category, and a 10% tax on vehicles with an engine capacity above 3000cc.
The newly amended Finance Bill 2023 stipulates that Customs will assess the import value of cars with engine capacities above 2001cc. This will form the basis for levying Customs Duty, Federal Excise Duty (FED), and Sales tax. The invoice value inclusive of all duties and taxes will apply to vehicles above 2001cc for both Completely Built-up (CBU) and locally assembled vehicles.
In situations where engine capacity isn’t relevant and the vehicle’s value surpasses Rs. 5 million, the applicable tax will amount to 3% of the import value. This includes the adjusted Customs Duty, FED, and Sales tax for imported vehicles, or the invoice value for locally assembled vehicles.