FED and sales tax reduced on locally-manufactured small cars

KARACHI: Federal Budget 2021/22 has proposed to abolish the federal excise duty (FED) and reduction in the sales tax on the locally-manufactured small cars.

The government proposed to reduce sales tax from the existing 17% to 12.5% on small cars up to the engine capacity of 850cc. Further, the sales of cars would be exempted from the value-added tax.

Further, the government proposed exemption of federal excise duty on the locally-manufactured small cars up to the engine capacity of 850cc.

The measures have been taken due to the rise in the prices of locally-manufactured small cars, which is a major concern for the low earning families.

Other measures taken in the auto sector included exemption from the value-addition tax on the import of electric vehicles, CKD kits for small cars, two to three wheelers.

The government decided to collect withholding tax on ‘own’ money on the sale of vehicles, if the vehicle is disposed of without registration.

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