KARACHI: Finance Minister Shaukat Tarin has announced a reduction in the sales tax and federal excise duty (FED) on locally manufactured cars up to 850cc and tax exemptions for electric cars to encourage the setting up of plants in the country.

Presenting the budget speech in the National Assembly on Friday, the minister announced to abolish the FED and reduce the sales tax to 12.5 percent from 17 percent. Earlier, the government was charging 40 percent to 47 percent taxes under the head of FED, customs duties, and sales tax.

Shaukat Tarin also announced to facilitate the importers of electric vehicles by reducing the FED from 17 percent to 1 percent.

He said the government will support electric vehicles imports to reduce the import bill of petroleum.

The government has decided to abolish value-added tax on 800 cc locally manufactured vehicles, the minister said.

STEP APPRECIATED: Meanwhile, an industry source appreciated the reduction of taxes in the budget 2021-22 and said it would bring the prices of local make cars down.

Umair Naseer, Associate Director, Research of Topline Securities, said that the decision will help bring small car prices down, but it will not support the auto industry.

He said the move would benefit those companies who are making small cars as their sale would go up. Pak Suzuki and United Motors would be a major beneficiary, he added.

All Pakistan Motor Dealers Association (APMDA) Chairman HM Shahzad said that the auto industry would not pass its benefit to consumers as they are already selling cars at double prices.

He said Suzuki is selling its 660 cc car at Rs1.4 million to Rs1.5 million in Pakistan, while its cost in India and other countries is around Rs400,000 to Rs500,000.

Instead of reduction of duties, he said the government should have allowed the import of used cars so that these companies have competitors in Pakistan and without competition, the reduction of price is not possible.

The author is a senior business reporter with bylines in leading newspapers and magazines across Pakistan.

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