The government’s decision of making sharp increase in advance income tax for non-filers may augur well for the local industry as they believe that this will at least eliminate investors and curb premium on spot sales of locally assembled vehicles.
However, the decision may create some hassle for the local assemblers in view of cumbersome procedural requirements and data confirmation of non filer but the decision may put help in curbing the menace of on money which used to thrive on investors’ presence.
Some authorised dealers said there will be no problem for filer of income tax. Out of total car sales in the country the share of corporate and government buying is 20-25 per cent followed by 15-20 per cent of car sales based on leasing. Buyers also include growers, farmers, businessmen and traders. They said that some 30 per cent of buyers’ category is vulnerable which do not pay income tax and it is to be seen how they would behave over the government’s decision. They said that the situation will clear in the next two months in terms of car sales.
Authorised dealers have issued the schedule for collecting advance income tax on purchase of new cars and jeeps relating to filers and non filers of income tax. The assemblers will collect the advance income tax as per decision taken in the Federal Budget 2014-2015 and will deposit the tax to the government treasury.
Pakistan Pak Suzuki Motor Company (PSMCL) had issued a circular to its authorized dealers on July 3, 2014 regarding ex-factory prices inclusive of advance income tax.
For example, the ex-factory price of Mehran VX and Mehran VXR is Rs 625,000 and Rs 678,000 on which Rs 10,000 advance income tax is fixed for filer and non filer. On Wagon R VX, Wagon R VXR and Wagon R VXL models whose price is Rs 899,000, Rs 1,049,000 and Rs 1,089,000 respectively, advance income tax on filer and non filer is Rs 20,000 and Rs 25,000 respectively.
Advance income tax on Cultus VXR is Rs 20,000 for filer and Rs 25,000 for non filer. The price of Cultus VXR is Rs 1,034,000. The rate of advance income tax on Liana RXI and Liana 1RXI for filer is Rs 50,000 and Rs 100,000 for non filer. The price of Liana RXI and IRXI is Rs 1,365,000 and Rs 1,444,000 respectively.
Swift DLX, DX STD, AT, DLX NV and AT NV whose price is 1,282,000, 1,418,000, Rs 1,330,000 and Rs 1,466,000 on which the dealers will collect Rs 50,000 for filer and Rs 100,000 for non filer.
Honda Atlas Pakistan will collect advance tax of Rs 30,000 and Rs 40,000 for filer and non filer on Honda Citi, while on Citi Aspire the amount for filer is Rs 50,000 and Rs 100,000 for non filer. On Honda Civic (all variables), Rs 75,000 will be charged from filer and Rs 150,000 from non filer.
Assemblers have asked their authorized dealers to carefully check customer’s status (either filer or non filer) on the website of Federal Board of Revenue (FBR).
According to changes in withholding tax law vide Finance Act 2014, purchase of car and jeep from a manufacturer will attract payment of adjustable advance tax and the obligation of collecting the advance tax has been placed on every manufacturer.
Where advance tax has not been collected by the manufacturer (as stated above) or at the time of import of a motor vehicle, the Excise and Taxation Department at the time of registration of vehicle shall collect adjustable advance tax.
In addition, payment of adjustable advance tax will also be attracted at the time of transfer of registration or ownership of a private motor vehicle within five years from the date of first registration and the obligation of collecting the advance tax have been placed on the Excise and Taxation Department.
On 1,801cc to 2,000cc, Rs 100,000 is for filer and Rs 200,000 for non filer. From 2001cc to 2,500cc the rate of tax on filer is Rs 150,000 and Rs 300,000 for non filer. On 2,501-3,000cc the rate for filer is Rs 200,000 and Rs 400,000 for non filer. On above 3,000cc the advance tax on filer is Rs 250,000 and Rs 450,000 for non filer.
In the category of rate of collection of tax at the time of collection of motor vehicle tax – Division III of Part IV of 1st Schedule, the rate of collection of adjustable advance at the time of collection of motor vehicle tax (token tax) is collected on annual basis in respect of private motor cars have been revised and higher rates have been prescribed for non filers. Up to 1,000cc the rate is Rs 1,000 for filer and non filer. In 1001-1,199 cc the rate is Rs 1,800 for filer and Rs 3,600 for non filer. On 2,000cc-1,299cc, the rate is Rs 2,000 and Rs 4,000 for filer and non filer. On 1,300-1,499cc, the rate is Rs 3,000 and Rs 6,000 for filer and non filer. On 1,500cc-1,599cc the rate is Rs 4,500 and Rs 9,000 for filer and non filer. In 1,600-1,999cc, the rate is Rs 6,000 and Rs 12,000 for filer and non filer. On 2,000cc and above, the rate is Rs 12,000 and Rs 24,000 for filer and non filer.
In case where motor vehicle tax is collected on lump sum, then up to 1,000cc the rate is Rs 10,000 for filer and non filer. From 1,001-1,199cc, the rate is fixed at Rs 18,000 for filer and Rs 36,000 for non filer. From 1,200-1,299cc, the rate is 20,000 for filer and Rs 40,000 for non filer while on 1,300cc-1,499cc, the rate is Rs 30,000 for filer and Rs 60,000 for non filer. From 1,500cc-1,599cc the rate is Rs 45,000 for filer and Rs 90,000 for non filer. On 1,600-1,999cc, the rate is Rs 60,000 and Rs 120,000 for filer and non filer. On 2,000cc and above, the rate of filer and non filer is Rs 120,000 and Rs 240,000 respectively.
To facilitate Excise and Taxation Department, a list of filers is available on FBR’s website to ensure that tax is deducted at source at appropriate rates. All individuals whose CNIC is not included in the list and all companies whose NTN is not included in the list, are liable to deduction of tax at source at higher rate.
Commenting on changes in withholding tax law, Chairman All Pakistan Motor Dealers Association (APMDA), H.M. Shahzad said first the government reduced age of used cars to three from five years followed by cut in depreciation limit to two years. In new Budget, the government raised import duties on used car imports and made changes in withholding tax law which would scared away buyers. Many people may not be able to pay these prohibitive taxes which mean the government is penalizing public for buying cars.
He said Pakistani citizens have become the highest taxed person in the world as everything of common use is taxed directly or indirectly.
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