They say a car is never scrapped in Pakistan, it only moves from one owner to another for several decades. This is why you’ll find so many 10 or 20-year old used cars for sale in Pakistan. While there might be several reasons for this occurrence such as Pakistan being a predominantly middle-class economy, there’s one reason that’s related to the latest policy change.
That reason is the incentive of reduction in token tax relief granted by federal and provincial authorities for 10-year-old cars. Punjab govt’s tax relief on 10-year old used cars has been a huge incentive for old car buyers. Previously as soon as a car surpassed 10 years of its model year, the token tax was halved.
So what has changed?
A couple of months ago, during the Provincial Assembly’s 2021-2022 Budget session, the Punjab government changed this relief from 50% to 25-30% for non-filers. Presumably, this was done to collect more taxes and discourage old cars as they cause more pollution. Filers, however, were favored with 50% token tax relief, in order to promote active taxpayers.
Nonetheless, just recently, the Punjab Government has taken a U-turn and scrapped this tax change. From now on, there will be no tax relief on 10-year-old cars. The reason being cited is that “old cars cause more pollution and therefore, are not good for the environment.” This news has devastated old car buyers who are already struggling to afford a car.
Why was this U-turn made?
The Punjab Government is acting in line with the federal government’s Auto Policy 2021-2026. The federal government has vowed to achieve 30% EVs in Pakistan by 2030. This was announced during a Virtual meeting of the 32-part UN Group of Friends on Sustainable Energy on 5th December 2020.
Last month, Prime Minister Imran Khan inaugurated Pakistan’s first locally manufactured electric motorcycle. He stated,” The launch of the motorcycle is a futuristic step for the country. EVs, particularly electric motorcycles as they are used more, will have to be introduced in cities to curb pollution”
Some are claiming that the move is not actually for the environment but that the government is working for the interests of giant automobile dealers. Since 10-year-old cars are mostly sold and bought outside the marketplace, dealers do not extract the most benefit. Importers, dealers, and manufacturers make the most out of new cars. Therefore, they lobby lawmakers to impose favorable policies.
Accusations aside, the Token Tax has now been imposed. Anyone who either refuses or fails to pay the token tax is liable to imposition of a fine, seizure of his/her vehicle, arrest, and eventually cancellation of his/her registration.
How to pay your vehicle’s token tax online?
Paying taxes, no matter of what kind, has never been easier in Pakistan. The Punjab government has taken the lead in digitizing its services. Tax-payers can now pay taxes from the comfort of their homes with a very easy-to-follow procedure.
- Punjab government’s e-Pay app is available on the Google Play store as well as on the Apple store. Search and then Install it.
- Create your account and then sign in.
- You’ll receive an SMS on your phone containing your OTP. Enter that OTP and then press the verify button
- Take your cursor to the Excise and Taxation Department’s tab, a drop-down list will appear. From that click on Token Tax.
- Enter your vehicle registration number
- Double-check the details and then click the confirm button
- A challan will be generated, note down your PISD number
- Now, pay your token tax either by going to the Bank, or ATM or using mobile Banking.
- Shortly, you will receive an email from the Punjab E&T department. Once you open the mail, you will find your Token tax slip in the attachments. Get it printed and keep it with you whenever asked.
The new token taxes rates are as such:
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