KARACHI, Dec 6: Drop in sale of vehicles and heavy taxation on their registration has seriously affected revenue collection by the Sindh excise department’s motor vehicle registration wing.

Sources said that revenue collection declined by more than 40 per cent.

Strict conditions by banks on car leasing and economic slowdown have also contributed to fall in revenue.

The Federal Board of Revenue increased the rate of annual income tax from Rs500 to Rs750 on cars up to 800cc and from Rs500 to Rs1,250 on cars of 1000cc. Tax on 1300cc and above cars was raised from Rs1,500 to Rs3,000.

The raise in tax rate ranges from 50 per cent to 100 per cent on small and big cars. The tax introduced in July this year is charged annually along with motor vehicle tax. The tax is in addition to the withholding tax charged on registration of vehicles ranging from Rs7,500 to Rs50,000 depending on the engine power.

The Sindh government also charges tax on luxury cars of 1,300cc and above but exempts small cars from payment of luxury tax.

Sources at the MVR wing told Dawn that owing to heavy taxes on motor vehicle registration and road tax, especially by the federal government, instances of tax-evasion have increased and are affecting revenue collection by the Sindh government.

Meanwhile, the FBR has not responded to the explanation sought by the MVR about double taxation on registration of imported cars as complained by the All-Pakistan Motor Dealers Association.

H M Shahzad, chairman of the association, said that importers were paying withholding tax on vehicles at import stage but the department was still charging the same tax at the time of registration.

He said that the association had received a clarification to this effect from the FBR.

MVR director Shoaib Siddiqui said that the department was charging tax under Section 235-B, which says that advance tax will be paid at the time of registration of new vehicles cars and jeeps.

However, on a complaint from the association, he sought explanation from the Income Tax Department about three months back but there was no response. “Unless any clarification is received from the department concerned, he cannot stop charging the tax.”

About reports of corruption in the MVR wing, he said that the Minister of Excise and Taxation, Mukesh Kumar, took prompt action on such complaints and about 25 employees had been suspended on missing vehicle registration files.

However, on the report of an inquiry committee, some employees were restored while disciplinary action was being taken against those found guilty.

Meanwhile, bids had been received in response to tenders floated for computerisation of different taxes under the ministry. These include upgrading of motor vehicle registration, processing of property tax, professional tax, infrastructure tax and linkage of MVR offices in the district headquarters in the interior.