The department that controls Excise, Taxation and Narcotics (ET&NCD) Punjab reportedly has proposed to remove the “Luxury Tax” on imported vehicles, as it is highly rated in Punjab as compared to other provinces, according to Express Tribune.
The purpose of the Luxury tax is to discourage the imported vehicles that become more expensive after the tax applied and minimize the cash outflow from the country, also encourage the local industry to grow locally.
There is a lot of difference in tax rates in Islamabad the capital territory and other provinces comparatively. Cars that are imported in Punjab are much more expensive than that of imported in Islamabad or any other province. People normally bypass Punjab and get their cars registered in Islamabad in order to escape heavy taxes, this results in no tax collection by Punjab.
Punjab Department of ET&NCD wish to minimize this gap and proposed the removal of Luxury tax on imported vehicles, this removal would almost equalize the taxes on imported cars across Pakistan and ET&NCD would be able to generate more revenues in Taxes.
According to details under Section (10) of the Punjab Finance Act 2016, a new kind of tax named “Luxury Tax” was imposed on imported vehicles over the 1300cc engine from June 2016 onwards. Taxation policy says, importers would pay Rs 70,000 for vehicles over 1300cc, Rs150,000 for vehicles over 1500cc, Rs200,000 for 2000cc or above, and Rs300,000 for vehicles with engine over 2500cc.
This amount is exclusively imposed by Punjab other than the customs duty, token tax, income tax, professional tax, registration fees, and withholding tax.
The officials of the department conducted several meetings and raised this issue to reconsider the tax on imported vehicles. They also proposed penalties on owners who get their vehicles registered in locations other than Punjab.
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Motor Vehicle Ordinance 1965, says if the vehicle stays in the province for more than 120 days it should get registered again with that province’s ET&NCD.
Cracking down on vehicle owners to get registered with ET&NCD was discussed in several meetings; however, the strategy was discarded eventually.
ET&NCD officials claim that reduction in taxes will benefit the province by increasing the number of registrations and collecting more revenue in taxes.