ECC’s GST hike sparks fears of surging car prices in Pakistan

WEB DESK: In a recent development, the Economic Coordination Committee (ECC) has opted to raise the general sales tax (GST) to 25 per cent on locally manufactured vehicles with an engine capacity of 1,400 cc and above.

This decision is expected to have notable repercussions for both the volume and revenue aspects of the automotive sector.

The ECC’s recent tax hike has triggered concerns among the public, fueling worries of a further escalation in car prices and heightened unaffordability.

The prevailing unease is rooted in the already elevated cost of automobiles, exemplified by the fact that the most budget-friendly sedan (1300 cc) in the country commands a price exceeding Rs4 million.

With existing anxieties regarding the rise in car prices, citizens fear that the already costly vehicles will become even more financially burdensome.

The public’s discontent is evident on social media platforms, with many criticising the decision for compounding the financial strain on the inflation-affected masses in Pakistan, exacerbating the challenges faced by the general public.

Auto assemblers remain sceptical of the ECC’s optimistic projection that the GST hike would generate an additional Rs4 billion in revenue.

Industry representatives argue that this measure is more likely to have adverse effects on the economy, fostering negative sentiments among consumers and eroding investors’ confidence in Pakistan’s market.

Expressing industry concerns, Abdul Waheed Khan, Director General of the Pakistan Automotive Manufacturers Association (PAMA), conveyed reservations to Caretaker Finance Minister Dr Shamshad Akhtar in a letter dated February 15.

Khan emphasised that the increase in GST would prompt a surge in prices of locally assembled cars, further burdening consumers already grappling with inflation and the economic slowdown, ultimately denting demand.

As stakeholders analyse the implications of this decision, the automotive industry prepares for potential challenges and economic repercussions in response to the heightened taxes on vehicles.

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