Islamabad: The Government of Pakistan has introduced a comprehensive ad valorem charge on all internal combustion engine motor vehicles, whether manufactured locally or imported, based on their engine capacity and type. The new levy aims to boost government revenue, discourage excessive imports, and promote local automobile manufacturing by introducing a structured taxation regime.
According to the official notification, vehicles with engine capacity of less than 1300 cubic centimeters (cc) will be subject to a 1% ad valorem charge. For locally assembled or manufactured vehicles, this charge will be calculated on the invoice price inclusive of duties and taxes. In the case of imported vehicles, the same 1% will apply to the assessed value, which also includes duties and taxes.
For vehicles falling in the 1300cc to 1800cc engine capacity range, the government has imposed a 2% ad valorem charge. This will be applicable to the invoice price for locally manufactured units, and the assessed value for imported vehicles, again inclusive of all duties and taxes.
The highest slab applies to vehicles with engine capacity exceeding 1800cc, where a 3% ad valorem charge will be levied. Similar to other categories, local manufacturers will calculate this charge on the invoice price, while importers will be liable to pay it on the assessed value, both of which include applicable duties and taxes.
The new charge structure also extends to buses and trucks equipped with internal combustion engines. Locally assembled or manufactured buses and trucks will be charged at 1% of the invoice price inclusive of duties and taxes, whereas imported buses and trucks will attract 1% on the assessed value under the same conditions.
This wide-ranging levy reflects the government’s intent to streamline tax collection in the automotive sector while offering a degree of protection to the domestic industry. Economists believe the measure may lead to a marginal increase in vehicle prices, particularly for imported cars, while also encouraging local production.
Industry responses have been mixed: local manufacturers have largely welcomed the move, terming it a step towards fair competition and industrial growth. However, importers and dealers of foreign vehicles have expressed concern over the additional financial burden, fearing a potential slowdown in demand due to rising end-user prices.
The implementation of this policy marks a significant shift in Pakistan’s automotive taxation framework, and its economic and market impact will be closely observed in the coming months.
