17% sales tax on government auctioned used cars

Finally, a sigh of relief for the buyers of government auctioned used/old vehicles as they will no longer be required to pay 17 percent sales tax at the time of purchase. The offer is only valid for vehicles where the sales tax had already been paid at the time of the local or import stage.

In certain cases, buyers were forced to deposit 17% sales tax on the purchase of resale/auctioned vehicles despite the sales tax having already been paid at the time of the local or import stage.

The Federal Board of Revenue (FBR) has issued a clarification in this regard, saying that any government/ autonomous department will have no legal right to ask buyers to pay 17 percent sales tax on used cars.

The clarification on the issue will end the controversy of collecting 17% sales tax on the auction/sale of old and used cars by the government departments/autonomous bodies.

There have been several complaints by bidders that the government departments /autonomous bodies are forcing the purchasers of the old and used cars and other vehicles to pay 17 percent sales tax at the time of auction. This was due to different clarifications issued by the FBR in the past on the said issue.

Meanwhile, the FBR stated that it has, from time to time, issued various clarifications vide letters dated August 2, 2006; November 21, 2013; January 7, 2020, and November 13, 2020, wherein, it has been conveyed that sales tax is not payable on old and used vehicles auctioned/sold by the government departments/ autonomous bodies, where tax was paid at the purchase/ import stage.

However, in case the vehicles were purchases and brought into the country or purchased by the auctioning department without payment of due sales tax, then the resale price of the vehicle by government departments /autonomous bodies is not exempted from the 17% sales taxes.