Vehicle transfer: Excise and taxation department laments increase in withholding tax

Says it would decrease revenue collection, calls method problematic.

KARACHI:

Sindh Excise and Taxation Department criticised the government’s decision to increase advance withholding tax on vehicles, stressing that it will drastically decrease revenue from vehicle registration.

Provincial Minister Excise and Taxation Mukesh Kumar Chawla raised objections regarding the implementation of new rates in the time frame provided by the FBR. Moreover, new tax rates will discourage people from registration and transfer of their vehicles and ultimately adversely affect the law and order situation of the country.

“Under the income tax ordinance Section 232-B, the federal government collects advance withholding tax annually on motor registration,” said Chawla. “Income tax filers and non-filer categories have been included in the tax collection. This tax, which was earlier collected once a year, will now be collected for five years every time a vehicle is transferred.

“The FBR issued us the order on June 25 to start tax collection under the new rules from July 1, which is impossible for the excise department. We don’t have access to check and verify the income tax filers and non-filers. The FBR will provide us the data of the filer in a CD every month but our computer software needs to be upgraded for new amendments. We need at least a month to upgrade the software and computer system. The FBR should come and discuss the issues and problems connected with the implementation of new rates and also pay us the service charges.”



He said that the people would not transfer their vehicles for five years and will instead choose to sell their vehicle on an “authority letter”—a process used in the bygone days—thus encouraging those who use vehicles in criminal activities.

Car dealers also raised objections on the new tax rates, calling the decision unwise and ‘foolish’. All Pakistan Motor Dealers Association Chairman H M Shahzad said that the FBR will lose the revenue that it generated from the old rates and will also affect the Sindh government’s revenue as people will stop car transfer. “I can get an undertaking that you have bought my car and you are using it while it is still under my ownership. Why would somebody transfer a car that costs Rs100,000 when he can use it without any cost,” said Shahzad.

Published in The Express Tribune, June 29^th, 2014.

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