FBR clears up confusions about sales tax levy on used vehicles business

ISLAMABAD: The Federal Board of Revenue clarified on Saturday the ‘misunderstanding’ that emerged following the amendment in its Sales Tax Rules 2006 for the sale and purchase of used vehicles and said that instead of levying more taxes the board has ‘extended concessions’, ARY News reported.

It said in a statement that before the amendment the sales tax of 17 per cent was levied on the total value of the selling amount.

The revenue body noted that earlier, according to law, the tax amount was much higher.

In a notification, the board said that after the consultations with Chambers of Commerce, it wrought out a clause in the Finance Act 2020 which deals with the taxation formula on sales and purchase of used vehicles.

The board claimed that the addition of the new clause was to encourage the business of sales and purchase of used vehicles as it now limits the levy of 17% tax on just the differential amount and not on the whole amount of sale.

READ: FBR felicitates historic quarterly tax collection exceeding Rs1tr mark

Earlier, it noted, the tax levy was calculated on the actual amount of sale/purchase.

However, the tax watchdog said that this concession was only extended to registered people while the unregistered sellers will not be able to demand sales tax from the buyers.

The act has been finalized after and has been enforced after the amendment was materialized, the FBR notification read.