Auto Sector Relief: Sales Tax Stay for Small Cars in Pakistan

Govt Rejects Proposal to Increase Sales Tax on Small Cars in 2025 Budget

The Pakistani government has rejected the general sales tax proposal on small vehicles in the upcoming fiscal budget. This serendipitous move is seen by many as a calculated effort to support the automotive industry – especially entry-level compact car buyers – in the difficult economic environment given the current inflationary conditions.

Maintaining tax thresholds affords consumers the ability to obtain affordable vehicles and ensures some level of demand in the small-car grouping. Since a lack of sales in the automotive industry has been a lament for many companies and professions, this is being seen as a major relief and comfort to manufacturers and dealers for ensuring they do not face a sudden jump in prices in a compact vehicle during a challenging economic environment.

• Govt halts a sales tax increase on small cars in their latest budget proposal, maintaining tax rates.
• Industry members are satisfied with the decision, as it preserves consumer interests and market momentum by avoiding tax increases to lower costs and hence afford vehicles.
• No tax increase means that prices of compact vehicles are more likely to resist inflationary pressures and not increase pricing during difficult economic times.
• Importantly, this government agreement is also a measure taken to maintain affordability for highway- and budget-oriented consumers. It gives comfort to … working effort to support the middle class.