Description:

The Federal Board of Revenue (FBR) risen withholding tax (WHT) on automobiles with engine capacities of 1601cc and above on July 1, 2022.

However, the FBR"s income tax explanation circular on Finance Act 2022 stated that section 231B was only applicable to private motor vehicles. WHT"s scope has now been expanded by removing the word "private" from the header and elsewhere in the section.

Furthermore, the replaced sub-section (7) of section 231B includes an inclusive approach of a motor vehicle with the following exceptions:

A motor vehicle used for public transportation, the transportation of goods, and the transportation of agricultural machinery; a rickshaw or a motorcycle rickshaw; and any other motor vehicle with an engine capacity of up to 2000cc. Except for the motor vehicles mentioned, the provisions of section 231B will apply to motor vehicles of all makes and models, regardless of whether they are used for private or commercial purposes by end users.

The WHT needed to be gathered at the time of vehicle purchase or registration has been increased for vehicles with engine capacities of 1601cc and above.

In the case of electric vehicles (EVs) where engine power is not available and the vehicle is worth Rs. 5 million or more, the tax collected will be 3% of the import value.

A new provision has been added that states that if the value of a vehicle is Rs. 5 million or more and the engine capacity is not applicable (electric vehicles), a tax of Rs. 20,000 will be collected at the time of registration or ownership transfer.

If a person"s name does not appear on the list of active taxpayers, the tax collectible under this section will be increased by 200 percent. Currently, Excise and Taxation authorities collect advance tax on traveller transport vehicles operating for hire based on the vehicle"s seating capacity.

The rates of extendable advance tax on such vehicles supplied in Division III of Part IV of the Ordinance"s First Schedule have been increased by substituting the Table in a specific manner, according to the FBR.