• The government considers raising the withholding tax on new car purchases.
• A proposed tax hike could significantly increase prices, impacting even budget-friendly models.
• The auto industry is already struggling with slow sales due to inflation.

The government is contemplating a substantial rise in withholding tax on new car purchases, with proposed changes not limited to a flat increase but a percentage-based hike affecting cars with engine capacities ranging from under 850 cc to 2000 cc.

Consider the Suzuki Alto, for instance. Presently, purchasing this car for Rs. 2.5 million incurs a withholding tax of Rs. 10,000. However, under the proposed tax rate, this amount could surge to Rs. 25,000. Such a move could lead to price hikes across all car segments, impacting even the most budget-friendly models.

The automotive industry, already struggling with sluggish sales due to rampant inflation, may encounter further hurdles. Despite offering various incentives and deals to attract buyers, the potential tax increase could deal another blow to an industry already facing challenges, exacerbating the country’s economic difficulties.

Even electric vehicles (EVs) may not be spared from this proposed change. The government is contemplating reversing tax exemptions for EVs priced above $50,000, encompassing high-end models like the Audi e-Tron and e-Tron GT.

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However, it’s crucial to recognize that these are currently just proposals. While it’s advisable to monitor the situation closely, there is no immediate cause for alarm.