Govt to increase prices of locally assembled cars by Rs 2 lakh per unit

The federal government has reportedly decided to increase prices of locally-assembled cars by up to Rs 200,000 per unit. This increase will come about as a result of imposing additional withholding tax in order to prevent individuals from exploiting the “on money” system.

As reported by Business Recorder, the Ministry of Industries and Production claims that a common complaint is the unnecessarily long delivery time for vehicles by their manufacturers. This system ends up being exploited and forces buyers to make an additional payment known as “on money”. In order to discourage this very practice of “on money”, the Ministry has proposed the introduction of additional Withholding Income Tax applicable on individuals who buy locally-manufactured cars from the OEMs and proceed to sell them within 90 days of the delivery of vehicles.

Sources claim that the Ministry has proposed additional withholding tax of Rs 50,000 on vehicles with engine capacity of up to 1000 CC, Rs 100,000 on up to 2000 CC, and Rs 200,000 on any engine capacity beyond 2000 CC.

At a recent meeting of the Cabinet, Prime Minister and other cabinet members raised the issue of “on money” being charged on the locally manufactured cars. The Cabinet members were of the view that the policy to import cars must be reviewed as the protection had allowed the local assemblers to exploit the consumers.

Meanwhile, Minister for Industries and Production Hammad Azhar explained that the car industry had a difficult time a few months ago due to Covid-19 situation and the pent-up demand had resulted in resurfacing of the “on-money” phenomenon. The situation would normalize as most of the manufactures were ramping up production.