SMEDA member criticises tax relief on luxury vehicles

KARACHI: Mashood Ali Khan, member, Small Medium Enterprise Development Authority (SMEDA) on Monday criticised a proposed tax relief on luxury vehicles priced above PKR 10 million.

He urged the government to reduce sales tax on vehicles under 1000cc from 18 percent to 9 percent adding that small cars serve the middle-class consumers and a tax reduction will directly benefit SME auto parts manufacturers by increasing production volumes and creating more job opportunities.

Khan pointed to the cost of CKD/SKD kit imports accounted for USD 2.118 billion in FY26 alone, and USD 6 billion over the past four years, calling this unsustainable under the current IMF programme.

He said that policy has historically favoured a small high-end buyer base while localization among Chinese and Korean luxury brands has remained negligible over the past decade, offering little benefit to SME parts manufacturers.

“Should scarce fiscal space be used to reduce the tax burden on luxury vehicles when millions of Pakistanis continue to bear the cost of economic adjustment?” Khan asked, adding that the timing sends the wrong signal while ordinary citizens face higher taxes and inflation.

Khan acknowledged that promoting cleaner transportation has merit, but any such relief must come with binding localization targets and a requirement to keep at least one model in production in Pakistan for five years without annual model changes.

Copyright Business Recorder, 2026