The government is contemplating a substantial rise in withholding tax on new car purchases, with proposed changes not limited to a flat increase but a percentage-based hike affecting cars with engine capacities ranging from under 850 cc to 2000 cc.
Suzuki Alto, for instance, purchased this car for Rs. 2.5 million incurs a withholding tax of Rs. 10,000. However, under the proposed tax rate, this amount could surge to Rs. 25,000. Such a move could lead to price hikes across all car segments, impacting even the most budget-friendly models.
The automotive industry, already struggling with sluggish sales due to rampant inflation, may encounter further hurdles. Despite offering various incentives and deals to attract buyers, the potential tax increase could deal another blow to an industry already facing challenges, exacerbating the country’s economic difficulties.
| Car Engine | Less than 850cc |
| Old Price | Rs2,331,000 |
| Old Tax | Rs10,000 |
| New Proposed Rate | 0.50percent |
| New Tax Rate | Rs12,500 |
| New Car Price | Rs2,342,655 |
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