The federal government has decided not to increase the sales tax on locally manufactured or assembled motorcars with engine capacities up to 850cc, according to informed sources. Earlier proposals had suggested raising the sales tax from the existing 10-12.5 percent to as high as 15-18 percent in the upcoming fiscal budget, but those recommendations have now been set aside.
As a result, the concessionary sales tax regime for small cars is expected to continue, with the Federal Board of Revenue (FBR) likely maintaining entry number 72 of the Eighth Schedule of the Sales Tax Act, 1990.
READ MORE: FBR Proposes 18% Sales Tax on E-Commerce Platforms in FY2025-26
Meanwhile, the International Monetary Fund (IMF) has called on Pakistan to introduce a carbon levy in the upcoming budget. This levy would target petrol, diesel, and internal combustion engine vehicles above 850cc. The IMF estimates that such a move could generate at least Rs. 25 billion annually. The final decision on the carbon levy is expected early next week.
