The Excise Taxation and Narcotics Control Department (ET&NCD) Punjab is suggesting the abolition of ‘luxury tax’ on imported vehicles. The proposal has been tabled to bring it at par with other provinces, media sources have been reported to have said.
The luxury tax on imported items including vehicles is imposed so that the local industry gains support by discouraging imports by making them more expensive. It also helps discourage imported goods flowing into the country which leads to valuable foreign exchange flowing out of the country.
Punjab’s excise department feels a differential in tax rates in provinces encourages consumers to register their vehicles in Islamabad, thus bypassing the provincial government’s authority and resulting in no tax at all.
‘Due to lesser registration rates and quarterly token tax payments, the majority of the imported vehicle owners prefer ET&NCD Islamabad instead of Punjab that takes yearly token tax payments,’ officials are reported to have said.
The taxation department, Islamabad has always maintained lower registration charges compared to Punjab. However, after the imposition of luxury tax on vehicles especially on cars with an engine capacity greater than 1300 cc, the gap between the tax rates widened significantly.
As per the section (10) of the Punjab finance Act 2016, imported vehicles with an engine capacity of over 1300 cc are liable to a levy of Rs 70,000, Rs 150,000 applicable on vehicles with an engine capacity of over 1500cc, Rs 200,000 on vehicles with engine capacity of 2000cc and above and Rs 300,000 for a car with engine capacity of over 2500cc.
It is pertinent to mention that this amount is additional to customs duty, token tax, income tax, professional tax. Registration fees, and withholding tax applicable on imported vehicles.
The matter of tax differentials has been under discussion in various meetings and the fiscal department was mulling fining importers of vehicles for registering cars in other provinces in line with the Motor Vehicle Ordinance (1965) which says that if a vehicle stays in a province for a period of over 120 days, it must apply for fresh registration with the ET&NCD department.
A crackdown on such owners of vehicles was under consideration, but the proposal was later discarded. The proposal for removal of luxury tax in under consideration with the Tax Reforms unit under the Finance department. As per the proposal, the removal of luxury tax would benefit by increasing the number of registrations in the province, hence leading to more revenue for the Excise department.
