KARACHI: Government of Pakistan, earlier this week, increased both regulatory and additional custom duties on various imported vehicles as a replacement for a complete ban on imported vehicles.

Duty and taxes on upto 800cc cars (Japan origin) is Rs907,000 and with addition of 100% surcharge of Rs 775,000 total duty/taxes/surcharge comes to Rs1.682 million.

Duty and taxes on upto 800cc vans (Japan origin) is Rs640,000 and with addition of 100% surcharge of Rs 545,000 total duty/taxes/surcharge comes to Rs1.682 million.

Duty and taxes on 801cc to 1000cc vehicles (Japan origin) is Rs1.12 million and with addition of 100% surcharge of Rs 906,000 total duty/taxes/surcharge comes to Rs2.02 million.

Duty and taxes on 1001cc to 1300cc vehicles (Japan origin) is Rs1.84 million and with addition of 100% surcharge of Rs 940,000 total duty/taxes/surcharge comes to Rs2.78 million.

Duty and taxes on 1301cc to 1500cc vehicles (Japan origin) is Rs1.66 million and with addition of 100% surcharge of Rs 930,000 total duty/taxes/surcharge comes to Rs2.59 million.

Duty and taxes on 1301cc to 1500cc Hybrid vehicles (Japan origin) is Rs2.36 million and with addition of 100% surcharge of Rs1.32 million total duty/taxes/surcharge comes to Rs3.68 million.

Duty and taxes on 1501cc to 1600cc Hybrid vehicles (Japan origin) is Rs2.72 million and with addition of 100% surcharge of Rs1.35 million total duty/taxes/surcharge comes to Rs4.08 million.

Duty and taxes on 1601cc to 1800cc Hybrid vehicles (Japan origin) is Rs3.37 million and with addition of 100% surcharge of Rs1.68 million total duty/taxes/surcharge comes to Rs5.05 million.

Duty and taxes on 1601cc to 1800cc C-HR/Hybrid/SUV vehicles (Japan origin) is Rs2.19 million and with addition of 100% surcharge of Rs2.06 million total duty/taxes/surcharge comes to Rs4.25 million.

It may be mentioned here that none foreign exchange is sent abroad against import of used vehicles under gift/baggage scheme, while the government receives duty/taxes in foreign exchange.

With these mammoth increase of duty/taxes and surcharge on imported vehicles, there would be a significant increase in import of CKD kits for vehicles. CKD kits are imported against repatriation of foreign exchange and duty and taxes are in rupees.

An official criticized the government saying it was not a good decision and would only benefit local assemblers, which had already monopolized the market.

The greatest increase in regulatory duties comes to customers for vehicles in the 1000cc to 1300cc category. The four fold increase in regulatory duties for the 1000cc to 1300cc category is likely to dent car imports overall as this is normally a very price sensitive category. Customers aim to find the best deals in this category as an alternative to locally manufactured options.

The minivan category is relatively negligible in Pakistan whereas customers for All Terrain 4×4 and SUVs are already accustomed to paying higher prices.

A noteworthy increase is the 10 fold increase in regulatory duties on electric vehicles. This indicates the Government is cognizant of the loophole in the Auto Policy 2021-26. Though the Government had incentivized the import of electric vehicles to galvanize electrification, companies used the policy as a means to solely cater towards high-net worth individuals by importing their most expensive electric vehicles into Pakistan.

Whether or not this will incentivize importers and companies to provide more affordable options or exit the electric vehicle category entirely remains to be seen.

Furthermore, the additional customs duty is levied upon the most premium customers once more. The efficacy of this increase is debatable given the number of customers in this segment relative to others. However, the more upmarket categories now provide the greatest source of revenue relative forex outflows across vehicles for the government given the total incidence of tax now levied upon them.