With the upcoming budget just days away, the Federal Board of Revenue (FBR) is deliberating on measures to increase the advance tax on motor vehicle registration, particularly targeting non-filers. The proposed plan suggests raising the tax rate by 10 to 35 per cent based on the value of vehicles.
Currently, the advance tax is determined by engine capacity, but significant changes are being considered for the forthcoming budget, set to be revealed in the first week of June. The Resource and Revenue Mobilisation Commission (RRMC) has recommended imposing the advance tax based on the value of the vehicle.
As per the proposed rates, the RRMC has advised the government to impose a 2 per cent advance tax on the corporate sector and 3 per cent on the non-corporate sector for individuals listed in the active taxpayers list (ATL) for the past three years. These rates would apply to motor vehicles valued up to Rs10 million.
For individuals, the proposed tax rate stands at 10 per cent. As for motor vehicles valued between Rs10 million and Rs30 million, the recommended tax rates are 4 per cent and 5 per cent for the corporate and non-corporate sectors, respectively, provided they are part of the ATL for the past three years.
Moving up the value scale, vehicles valued between Rs30 million and Rs100 million would face tax rates of 6-7 per cent for the corporate and non-corporate sectors. The proposed tax rate for individuals would be increased significantly to 30 per cent.
For vehicles valued up to Rs100 million, the proposed tax rates are 8 per cent and 10 per cent for the corporate and non-corporate sectors, respectively, for individuals present in the ATL for the past three years. Individuals falling under this category would face a tax rate of 35 per cent.
The RRMC has also recommended subjecting the transport sector to a minimum tax regime of 3 per cent of the gross turnover, applicable to transport services provided to withholding agents. Additionally, a tax rate of 3.5 per cent would be levied on the gross amount received for the provision of carriage services by transport contractors, while oil tanker contractors would face a tax rate of 2.5 per cent.
These proposed changes in the tax structure aim to generate increased revenue for the government and incentivize compliance with tax regulations. By targeting motor vehicle registration, the FBR hopes to enhance revenue collection and promote a fair tax system.
It is essential to note that these proposed changes are subject to approval and implementation during the budget announcement. The FBR and RRMC are carefully evaluating the potential impact of these adjustments on various sectors and taxpayers, striving to strike a balance between revenue generation and taxpayer convenience.
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