Federal Board of Revenue (FBR) on Saturday said that sales tax is applicable at 17 percent on sale of used cars only on value addition.
Clarifying news reports regarding levying of 17 percent sales tax on resale of used and refurbished vehicles, the FBR said that the existing law charged sales tax on full sale value which was harsh and excessive.
On the request of business community who are engaged in such business and after seeking support of major chambers of commerce of the country, a clause was added in the Finance Act to provide relief and to encourage refurbishing of second hand vehicles.
This relief is available to only registered persons in sales tax and is restricted to 17 percent of value addition made by such players.
No unregistered person can deduct or demand such sales tax from a buyer. It is further clarified that only rules have been finalized now.