Govt Officially Announces Huge Tax Exemptions for 1000cc Cars

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In a recent promising development, it has been revealed that, as per the revisions in the 2021 financial budget, the tax exemptions for 850cc vehicles have been extended to vehicles with an engine capacity of up to 1000cc. The announcement has been made by the Federal Minister for Finance and Revenue, Shaukat Tarin, in a National Assembly session that took place today.

As per reports, the government has taken the decision after learning about the limited number of options available to the car buyers in the 850cc segment. This implies that, along with the prospective decline in the prices of 850cc vehicles, the prices of 1000cc vehicles could also observe a decline, following the implementation of the budget from July 1, 2021.


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To recap, here are the benefits that were provided to the 850cc segment, that have also reportedly been extended to include 1000cc cars as well:

  • Reduction in the general sales tax (GST) rate from 17 percent to 12.5 percent for the locally assembled vehicles.
  • The Federal Excise Duty (FED), which was previously 2.5 percent, has now been completely abolished.
  • Value Added Tax (VAT) on the imports of Completely Knocked Down (CKD) kits for the vehicles has also been removed.
  • Exemption of the imports of the Completely Built-up Units (CBUs) of vehicles from customs duty and regulatory duty in order to support the small vehicle segment.
  • Unlike the concessions for the EV segment, the concessions for this particular segment are likely to be changed in the next fiscal year, as they are not yet a part of a long-term policy.

Last week, it was reported that the government had been considering extending the incentives provided to the 850cc vehicles to include 1000cc vehicles as well, due to the lack of choices in the 850cc segment.


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The decision was deliberated in a meeting for the review and finalization of the new auto policy that had been called by the Federal Minister for Finance and Revenue, Shaukat Tarin, on June 18.

In the meeting, Federal Minister for Industries and Production, Makhdum Khusro Bakhtyar, informed the participants that the tax concessions will also be provided on the manufacturing, sales, and purchase of vehicles that are between 850cc and 1000cc.

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