rewrite this title with different wordingA Relief – Sales Tax on Local Hybrid Cars to Remain Unchanged

If you remember, we told you about a “secret attack” on the locally assembled Hybrid Electric Vehicles (HEVs) when the government announced that it was going to increase the General Sales Tax (GST) on them to 25% from the existing 8.5%, which is a relief in taxes for the segment. The announcement was rather a shock for the local car makers as almost $100-125 million has been invested in Pakistan for the development of this technology. The companies, including Toyota, Sazgar Engineering (Haval), and Hyundai, currently producing local hybrids, protested against it and appealed to the government to take this hike back. 

Objections on Sales Tax 

The issue was also raised during a Standing Committee on Finance meeting, where it was stated that such an act would hamper the progress on production of HEVs in the country and would impact future investment.

In a letter, the Industry and Production Ministry highlighted the significant investments made by renowned auto manufacturers, such as Toyota, Hyundai, and Sazgar, in the production of HEVs under the AIDEP. It also noted the plans of other companies, including Honda, Suzuki, and Kia, to enter the segment. “The imposition of higher taxes without consultation will not only impact existing investments but also deter future ones in HEV technology,” the letter warned.

“This move also undermines the objectives of National Climate Change Policy and Renewable Energy Policy,” the letter mentions, adding, “It is requested to reverse the sales tax to 8.5% as defined in the AIDEP 2021-26.” During the same meeting, the Federal Bureau of Revenue (FBR) assured that they would review this decision. 

Announcement by Finance Minister 

In his speech in the National Assembly today, Finance Minister Muhammad Aurangzeb announced that “the reduced sales tax rate will continue to apply on HEVs mentioned in Schedule 8 and Serial No 73.” 

This is a sigh of relief for the local companies as the prices of local hybrid cars will not increase after this announcement. However, if the government had decided to impose the increased rate of GST, the prices of local HEVs would have skyrocketed.

Meanwhile, the omission of relief on imported used hybrid cars is unclear, and we will update you as soon as we have an authentic update.

What do you think about the government’s decision to keep the reduced tax on local hybrid cars? Please share your thoughts with us in the comments section.