Budget 2025 Car Hike: In an unexpected move that has sent ripples across the automotive sector, the Pakistani government has announced a substantial increase in withholding tax on new car purchases as part of its Budget 2025. This policy shift will escalate car prices from the most economical models to luxury vehicles, causing concern among consumers and manufacturers.
The government will now calculate the withholding tax as a percentage of the car’s price, replacing the previous fixed amount determined by engine capacity. This change is expected to affect all vehicles, particularly those with engine capacities ranging from under 850 cc to 2000 cc. For instance, a Suzuki Alto priced at Rs. 2.5 million, which currently incurs a withholding tax of Rs. 10,000, will see this tax jump to Rs. 25,000 under the new regulations.
Tax Details
This increase comes at a time when the automotive industry is already struggling with declining sales due to the economic strain of inflation. The industry has been actively trying to attract buyers with various offers and deals, but the additional tax burden could potentially deter prospective customers further.
Moreover, the government has also proposed withdrawing tax exemptions for electric vehicles (EVs), particularly affecting those priced above $50,000. This includes high-end models like the Audi e-Tron and e-Tron GT. The removal of these exemptions is likely to slow the adoption of EVs in the country, contrary to the global trend of encouraging cleaner and more sustainable modes of transportation.
Since the budget proposals have not yet received approval, there remains a glimmer of hope that decision-makers may reconsider these measures. However, if implemented, they could have far-reaching consequences for the automotive market and the broader economy. The government made this decision to align taxation with the increased prices of vehicles, ensuring a fair tax benefit from the sale of each car.
The automotive industry stakeholders and consumer rights advocates closely monitor the situation, hoping for a favorable outcome that balances the government’s need for revenue with the public’s ability to afford new vehicles.
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