17% Sales Tax Waived Off for Buyers of Cars Auctioned by Govt

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17% Sales Tax Waived Off for Buyers of Cars Auctioned by Govt

The purchasers of old and used vehicles from government departments/self-subsidies would not have to pay sales tax of 17% legally if they had already paid sales tax at the time of the national or international phase of importation.

Experts said if any government department asked that the sales/sale of old and used vehicles pay 17 percent of sales tax, after FBR clarifies this issue, it would be illegal.

Sources informed Propakistani that such an understanding by the Federal Revenue Board (FBR) would put an end to the debate about collecting 17 percent of sales tax by government departments/autonomous bodies on auction/sale of old and used cars. The governments / autonomous authorities are now obliging buyers of old vehicles and other vehicles to pay 17% sales tax at the time of the auction. This was due to various clarifications that the FBR had previously made on this subject.

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The buyers were forced to deposit 17% sales tax on car sales/auction even if sales tax was already paid at a local or import stage.

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Sources stated that the question of the charging of the sales tax on the vehicle auction has been considered taking into account clarifications from time to time issued by the Board.

In reply, the FBR stated that it was notified that the board had from time to time issued several video clarifications dated 2 August 2006; 21 November 2013; 7 January 2020 and 13 November 2020, whereby, on old and used vehicles auctioned/sold by the autonomous authorities where tax was paid at the buy/importation stage, the sales tax had not been paid.

The above exemption shall not, however, be applied to vehicles brought into the country, purchased without payment of the due sales tax, still in force and subject to government departments/self-government bodies, sources referred to in the FBR by the auctioning department.

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The above exemption shall not, however, be applied to vehicles brought into the country, purchased without payment of the due sales tax, still in force and subject to government departments/self-government bodies, sources referred to in the FBR by the auctioning department.

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However, in a broader context, the video of clarification dated 20 November 2020 implied that sales tax of goods including vehicles should be auctioned at 17%, as per paragraph 2(33)(b) of the sales tax law, 1990.

In this respect, the Board clarified that no Sales Tax shall be charged for auctioning of used and old vehicles when sale tax was paid during the local or import period.

Whereas, in relation to the auction of unusable/condemned old and used vehicles, the same charge will be paid by the tenderers for the 17 percent sales tax, regardless of whether the sales tax has already been payable on the vehicles imported or purchased locally, and the charge is therefore imposed on the federal treasury, sources cited in FBR clarification have been given.

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