Autos

What the GST Increase Means for Pakistan’s Auto Industry and Consumers

What the GST Increase Means for Pakistan's Auto Industry and Consumers

For a layperson, understanding the taxation system in Pakistan is like straightening the twines of electricity wires in the walled city Lahore. However, this much can be deciphered is that usually when the rates of General Sales Tax (GST) and Federal Excise Duty (FED) are increased, the prices of cars and motorcycles increase as well. 

To give you an example. The proverbial ink hadn’t dried on the finance minister’s speech when Atlas Honda Ltd (AHL), the biggest assembler of bikes in Pakistan, jacked up the prices of its entire fleet by as much as Rs.35,000. 

Read: Up To Rs.35,000 Honda Bike Price Increase in Pakistan (2023)

PAST

Yesterday, in the “mini budget” tabled in the Parliament, both FED and GST rates were increased. Though the government has not increased these rates vis-a-vis cars and automobiles in general. For example, FED rates have been increased on cigarettes, sugary drinks, air travel and cement bags, etc. Similarly, GST rates have been increased 1% (from 17% to 18%) in general and by 8% on luxury items (expensive imported cars like Land Cruisers, Range Rovers and others), etc. However, it is the 1% general increase in the GST rate which can increase the prices of locally-assembled cars in Pakistan.

PRESENT

The following chart will help you get an idea of where car prices are headed in Pakistan in the near future. Once again, these are estimated and anticipatory prices.

FUTURE

Our readers know that almost all, if not all, automobile assemblers in Pakistan have raised the prices of their cars up to three times (in some cases) since the beginning of this year. 

The tabling of the present “mini budget” has come at the most unfortunate juncture when the automobile sector is reeling from declining sales. Take the sales for the month of January 2023 of locally-assembled Suzuki Alto for example. Would you believe that the hottest subcompact hatchback of Pakistan sold only 44 units in the entire month throughout Pakistan? 

Earlier this month, in a joint letter written by Pakistan Automotive Manufacturers Association (PAMA) and Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) to the Governor of the State Bank of Pakistan (SBP), the office bearers of the two associations alarmed the SBP that due to its policy of restrictions imposed on import of CKD kits, the local automobile industry is one of the verge of extinction. The letter further informed the governor that workers are being laid off and plants intermittently shut for lack of work. They further warned that if corrective measures are not taken immediately, there would be massive layoffs, revenue shortfall for the government, capital flight and plant closures.

If you read the contents of this letter with the latest sales data released by PAMA and the recently proposed GST rate hike, you would come to know that very bad times await Pakistan’s auto industry. 

You may also like to read:

Hold on to Your Wallets: Pakistan’s Mini Budget Set to Drop a Price Nuke

PAMA – Toyota Fortuner & Hilux Dethroned Suzuki Alto

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