Car registration revenue soars 177 percent

KARACHI: Collection of withholding tax on registration and transfer of motor vehicles surged 177 percent during eight months this fiscal, an upshot of an additional tax imposed in February 2021 to deter ‘on money’, officials said on Wednesday.

The collection of withholding tax on registration of new motor vehicles or transfer of ownership of a motor vehicle grew to Rs1.72 billion during July–February 2020/2021. That compared with Rs621 million in the same period of the last fiscal year.

Sindh Excise and Taxation Department collects the withholding tax on registration and transfer of motor vehicles on behalf of Regional Tax Office (RTO)-I Karachi under Section 231B of the Income Tax Ordinance, 2001.

Through Tax Laws (Amendment) Ordinance, 2021, which was promulgated in February 2021, a new provision in Section 231B was introduced under which additional tax was imposed on first sale of new registered motor vehicles within 90 days.

“Every motor vehicle registering authority of excise and taxation department shall collect advance tax from the buyers of locally manufactured motor vehicles who subsequently sell it within ninety days of delivery of such vehicle whether prior to or after registration,” says the amended law.

The amendment makes collection of Rs50,000 mandatory as additional tax on the sale of motor vehicles up to 1000CC, Rs100,000 on cars from 1000CC to 2000CC, and Rs200,000 on 2000CC and above four-wheelers.

The additional withholding tax has been imposed till June 30, 2021.

The provincial excise department also collects motor vehicle tax on behalf of RTO-I Karachi under Section 234 of the Income Tax Ordinance, 2001.

The RTO-I Karachi collected Rs1.04 billion as motor vehicle tax during the first eight months of the current fiscal year as compared with Rs1.1 billion collected in the corresponding period of the last fiscal year, showing a five percent decline.

The Federal Board of Revenue (FBR) has assigned tax collection under different heads to tax offices.