Federal Budget proposes shift to value-based tax for motor vehicles

June 13, 2023 (MLN): The advance tax on the registration of motor vehicles, which is currently based on engine capacity, is proposed to be shifted to a value-based system, according to the amendments unveiled in the Federal Budget for FY 2024-25.

Under the existing law, advance tax is levied on the purchase and registration of vehicles up to two thousand (2000) cc based on engine capacity.

However, the government has decided to transition towards a value-based mechanism to fully leverage the tax potential, as vehicle prices have increased significantly.

The high prices of motor vehicles are a significant concern for the population, and with the adoption of this change, prices are expected to escalate further.

These tax initiatives are being taken by the government to achieve its tax revenue target for FY25, set at Rs12.97 trillion, around 40.2% higher compared to the revised estimates of Rs9.25tr for FY24.

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