The Excise Taxation and Narcotics Control Department (ET&NCD) Punjab is proposing removal of ‘luxury tax’ on the import of vehicles. The move seeks to bring the taxation rate at par with other provinces and the federal area.
The luxury tax is aimed at discouraging import of vehicles from foreign countries — used and unused vehicles both. It has been used by government stop the outflow of foreign exchange which has been a major talking point in 2016-17. The luxury tax encourages the local industry by making the imported goods expensive – a move which has seen local automobile industry get stronger.
Punjab Government’s Area of Concern
Punjab’s ET&NC department feels that difference in tax rates is encouraging consumers to get vehicles registered in Islamabad. The bypassing of provincial authority altogether is resulting in loss of tax-revenue as well as almost free registration in federal territory.
“Due to lesser registration rates and quarterly token tax payments, majority of the imported vehicle owners prefer ET&NCD Islamabad, instead of Punjab that takes yearly token tax payments.”
It was further revealed that:
“ET&NCD Islamabad has always offered lesser registration charges than Punjab’s taxation department, however, the gap abnormally widened after the ‘luxury tax’ was imposed on imported vehicles that have an engine capacity of over 1,300.”
Luxury tax was imposed on import of vehicles over 1,300cc from June, under Section (10) of Punjab Finance Act 2016. The taxation policy states that owners of these imported vehicles would pay
- Rs70,000 for a vehicle with an engine capacity of over 1,300cc,
- Rs150,000 for a vehicle with an engine capacity of over 1,500cc,
- Rs200,000 for a vehicle with an engine capacity of over 2,000cc
- Rs300,000 for a vehicle with an engine capacity of over 2,500cc
This amount is other than the customs duty, token tax, income tax, professional tax, registration fees, and withholding tax already charged from owners who import vehicles.
Tax Reform Unit
The proposal to reconsider luxury tax is under deliberation with Tax Reforms Unit under the Finance Department. The key area of concern removing the luxury tax will be increased registration in Punjab for various vehicles. The Excise department is keen for the change as it will directly lead to increased revenue in the form of yearly token taxes that every vehicle has to pay.