Tuesday September 28, 2021

Tax collection from car registrations falls 40 percent in July-March

KARACHI: Withholding tax collection from new cars’ registration sharply fell 40 percent in the first nine months of the current fiscal year of 2019/20, official data showed on Tuesday, as auto sector was adversely hit by slowdown in economic activities.

The tax collection from new car registration amounted to Rs700 million during the July-March period of FY2020 compared with Rs1.162 billion in the corresponding period of the last fiscal year.

Withholding tax collection from transfer of motor vehicles also dipped around 14 percent in the period under review. The collection amounted to Rs782 million compared with Rs905 million, according to the Regional Tax Office (RTO-II) Karachi, which has jurisdiction over collecting of withholding tax on registration and transfer of motor vehicles by the provincial motor vehicle registration authority.

The government took a number of measures during the period to bring the economy back on the stabilisation path. The growth decelerated to 3.3 percent last fiscal year from 5.5 percent a year earlier.

The economy size is likely to shrink further this fiscal year as the novel coronavirus-lockdown brought the economic activities almost to a grinding halt. In July-March, slowdown in economic activities and higher prices weighed down auto sales, according to the sources in RTO-II.

Pakistan Automotive Manufacturers Association’s data showed that car sales fell 47 percent to 97,664 units during the July-March 2019/20. Car sales stood at 185,023 units in the corresponding period of the last fiscal year. In March, car sales witnessed 70 percent decline to 6,830 units. That was compared with 22,783 units in the same month of the last year.

The sources said since the sales witnessed massive decline in March, the tax collection for April would also decline. The sources also attributed the decline in tax collection from car purchase to the introduction of new provisions of 100 percent additional tax on non-compliant taxpayers.

Through Finance Act, 2019 a tenth schedule was introduced into Income Tax Ordinance, 2001 under which a taxpayer who fails to file income tax returns by due date or not on the tax net is subject to pay 100 percent higher tax rate at the time of making certain transactions.

As per the applicable withholding tax rate on motor vehicle, the minimum engine capacity of up to 850cc attracts Rs7,500 for taxpayers included in the active taxpayers list (ATL) and Rs15,000 for those who are not in the ATL. The sources said the increase in number of income tax return filers also reduced the revenue collection under the head.

Weekly ATL 2019 for returns filed up to April 5 showed that the Federal Board of Revenue (FBR) received around 2.6 million returns. FBR received 2.59 million income tax returns till March 22, 2020.