Cars to become more expensive as new taxes proposed in Budget 2024

The upcoming Budget 2024 includes a proposal to levy an advance tax on the registration of motor vehicles based on their price rather than engine capacity.

Federal Finance Minister Senator Muhammad Aurangzeb announced this change, explaining that the current law collects advance tax on vehicles up to 2000 cc based on engine capacity.

Minister Aurangzeb emphasized the significant increase in vehicle prices, suggesting that changing the tax basis to the vehicle price would better capture the true potential of the tax. This adjustment aims to ensure a more proportionate tax collection method reflecting the actual value of motor vehicles.

Additionally, the government has decided to scrap the subsidy on the import of hybrid and luxury electric vehicles in the budget for the fiscal year 2024-25. According to the budget document, customs duty on the import of hybrid vehicles was discounted in 2013 due to the significant price difference between hybrid and conventional vehicles.

However, the price gap has narrowed, and domestic production of hybrid vehicles has started, prompting the government to withdraw this concession to boost local industry.

The government also announced the end of the subsidy on the import of luxury electric vehicles. The budget document states that the exemption on the import of luxury electric vehicles is being withdrawn, as those who can afford to import vehicles worth $50,000 and above should be able to pay additional taxes and duties.

According to the finance bill, a withholding tax of Rs 25,000 has been imposed on a vehicle up to 850 cc, in addition to this, Rs 40,000 on vehicles between 850 and 1000 cc, Rs 67,500 on vehicles between 1000 cc and 1300 cc, and Rs 1,300. It has been proposed to levy a tax of Rs.120 thousand on 1800 cc.