Finance Act 2025: Pakistan’s auto industry grapples with enforcement challenges

ISLAMABAD: The auto industry is confused to deal with the enforcement of the Finance Act 2025 which has restricted ineligible persons from booking or purchasing motor vehicles from July 1, 2025.

The Federal Board of Revenue (FBR) Member Inland Revenue (Policy) has received a letter from Pakistan Automotive Manufactures Association (PAMA) seeking clarification on bar on Booking and Purchase of Motor Vehicles under the Finance Act 2025.

According to the PAMA, refer to the subject matter regarding the enforcement of the new law under the Finance Act 2025, which restricts ineligible persons from booking or purchasing a motor vehicle. The law further mandates that any motor vehicle booked or purchased by such persons shall not be registered by the relevant authorities. In this regard, we request clarifications to facilitate the smooth transition and effective implementation of the new law:

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a) The process for determining eligibility remains unclear. Since the restriction applies at the booking stage, the initial step towards vehicle purchase, it implies that every prospective buyer must first obtain an eligibility certificate or similar approval from the competent authority before proceeding.

b) As the eligibility certificate will be a crucial document, we request that the issuance mechanism be defined promptly to avoid delays in motor vehicles bookings. It is suggested that FBR consider developing an eligibility portal similar the filers portal.

c) The definition of an eligible person under the Income Tax Law applies to individuals, companies, and associations of persons. This condition should not apply to purchases made by the Federal Government, Provincial Government, Local Government, Armed Forces and their related departments, Organisations, authorities, etc.

As the new law has already come into effect from July 1, 2025, we anticipate delays in operational clarity. In the interim, we urge the government to consider allowing temporary bookings for waiting customers until requisite clarifications are issued.

The association referred to section 114C (Restriction on economic transactions by certain persons), Notwithstanding anything contained in any law for the time being in force, —(a) any application, by any ineligible person, for booking, purchase or registration of a motor vehicle of the value exceeding the threshold given in Fifteenth Schedule, shall not be accepted or processed by any manufacturer of a motor vehicle or vehicle registering authority of Excise and Taxation Department, as the case may be, the new section in the Income Tax Ordinance 2001 stated.

The FBR’s early attention and action to this matter will be highly appreciated, it added.

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