It also did away with the restriction on non-filers buying 1300cc cars
Buying a Honda Civic or Toyota Grande will now cost you Rs280,000 more because the government has increased duties on these cars in its supplementary budget announced on Wednesday.
In the Finance Supplementary (Second Amendment) Bill, 2019, the government had proposed a 10% increase in federal excise duty for locally-manufactured motor vehicles with an engine capacity of 1800cc and above. However, it has now revised the proposed engine capacity to 1700cc variants and above.
This means that the Honda Civic 1799cc variant and Toyota Altis Grande 1798cc variant will now fall under the purview of this amendment and see a price increase of 10%. According the company websites, the variants of both cars are selling for Rs2.8 million.
While lovers of Civics and Grandes will have to pay more, the supplementary bill comes with another amendment that will allow non-filers to buy locally-manufactured cars irrespective of their engine capacity. This is because the government has abolished a restriction that barred non-filers from buying new vehicles above 1300cc engine capacity.
The amendments related to the auto sector proved to be a positive trigger for local automakers. The stock of all three major automakers, Pak Suzuki Motors Company Limited, Indus Motors (the makers of the Corolla) and Honda Cars, hit their upper limit after rising 5% from their opening price with more than 698,000 shares changing hands on Thursday.
“The removal of the non-filer ban will be majorly positive for Indus Motors, since all its variants [except the Corolla Gli/Xli] are above 1,300cc,” Intermarket Securities said in a report, adding that more than 30% of IMC’s customers are non-filers. In the case of Honda, non-filers constitute 10% of its customer base.
Local automakers have already increased prices by 25% in the last 12 months due to depreciation of the rupee against the dollar. About 70% of their parts are imported and paid for in dollars.
Since coming into power, the PTI government has been facing a double challenge of a trade deficit and a budget deficit. This is because for every dollar earned, the country spends two. On the other hand, government’s expenses far exceed its revenue, creating a loss of over Rs2 trillion a year.
When it comes to auto sector, the government has made several amendments, including the imposition of restriction on non-filers and increasing taxes (some reversed later), to increasing its tax revenue and bringing more people under the tax net.
In the latest amendment, the government has increased the federal excise duty on imported luxury cars above 1800cc from the existing 20% (imposed in January) to 25% in supplementary budget unveiled on Wednesday. The duty on imported vehicles exceeding 3000cc engine capacity has been raised to 30%.