How much advance tax do I pay when I register a new car, and is it based on engine cc or the price?

When you buy a new car in Pakistan, income tax is collected in advance, either by the manufacturer at the time of sale or by the Excise and Taxation registering authority at registration. This page uses the Income Tax Ordinance, 2001 as amended to 30 June 2026, so the rates are those for tax year 2027 (1 July 2026 to 30 June 2027).

What does the law say?

Section 231B(1) requires every motor vehicle registering authority of the Excise and Taxation Department to collect advance tax when a motor vehicle is registered, at the rates in Division VII of Part IV of the First Schedule. Section 231B(3) separately requires every manufacturer of a motor vehicle to collect advance tax at the same Division VII rate from the person to whom it sells a motor car or jeep.

The rate table is in clause (1) of Division VII. Each band is a percentage of the value of the vehicle:

Engine capacity	Rate of tax
Up to 850cc	0.5% of the value
851cc to 1000cc	1% of the value
1001cc to 1300cc	1.5% of the value
1301cc to 1600cc	2% of the value
1601cc to 1800cc	3% of the value
1801cc to 2000cc	5% of the value
2001cc to 2500cc	7% of the value
2501cc to 3000cc	9% of the value
Above 3000cc	12% of the value

So the answer to “cc or price?” is both. The engine capacity decides which percentage applies, and the price decides what the percentage is multiplied by.

What counts as the “value” of the car?

The first proviso to Division VII clause (1) defines value by how the car came into the market:

• Imported into Pakistan: the import value assessed by Customs, increased by customs duty, federal excise duty and sales tax payable at the import stage.
• Manufactured or assembled locally: the invoice value inclusive of all duties and taxes.
• Auctioned: the auction value inclusive of all duties and taxes.

The second proviso deals with vehicles where engine capacity is not applicable, such as a car without a combustion engine. If the value is Rs. 5 million or more, the tax is 3% of the import value (increased by customs duty, sales tax and federal excise duty) for an imported vehicle, or of the invoice value for a locally manufactured or assembled one. The proviso says nothing about such a vehicle valued below Rs. 5 million, and this page does not fill that gap.

How does it work in practice?

For a locally manufactured car, the manufacturer collects the tax at the time of sale under section 231B(3). Section 231B(4) then says the registration collection under sub-section (1) does not apply if the buyer produces evidence that the manufacturer already collected tax under sub-section (3) from the same person for the same vehicle. For an imported car, the same relief applies where tax under section 148 was collected from the same person at import.

Section 231B(5) makes the tax adjustable, which means it counts towards the buyer’s final income tax liability for the year when a return is filed. The same sub-section lists who is outside the section: the Federal Government, a Provincial Government, a Local Government, a foreign diplomat and a diplomatic mission in Pakistan.

Section 231B(7) defines “motor vehicle” to include a car, caravan automobile, jeep, limousine, pickup, sports utility vehicle, truck, van, wagon and any other automobile. It excludes vehicles used for public transportation, carriage of goods and agriculture machinery, rickshaws and motorcycle rickshaws, and any vehicle with engine capacity up to 200cc.

Worked example (illustrative figures)

Car 1. Ayesha in Lahore buys a locally assembled 1,299cc hatchback. The invoice value inclusive of all duties and taxes is Rs. 4,800,000. She appears in the active taxpayers’ list.

1. Engine band: 1001cc to 1300cc, so the rate is 1.5%.
2. Tax: Rs. 4,800,000 x 1.5% = Rs. 72,000.
3. The manufacturer collects Rs. 72,000 at sale under section 231B(3). At registration she shows proof of this, and under section 231B(4) the registering authority does not collect again.

Car 2. Hamza in Islamabad buys a locally assembled vehicle with no engine capacity, invoiced at Rs. 8,000,000, which is above Rs. 5 million.

1. The second proviso applies: 3% of the invoice value.
2. Tax: Rs. 8,000,000 x 3% = Rs. 240,000.

What if the buyer is not on the active taxpayers’ list?

The first proviso to rule 1 of the Tenth Schedule says tax under section 231B is increased by two hundred percent of the First Schedule rate for a person not appearing in the active taxpayers’ list. Increasing 1.5% by 200% of itself gives 4.5%. For Ayesha’s car in the example, that would be Rs. 4,800,000 x 4.5% = Rs. 216,000 instead of Rs. 72,000.

What if the car was bought by someone else before registration?

Section 231B(2A) covers a locally manufactured vehicle that the original buyer sold on before it was registered. The registering authority collects a separate fixed amount under clause (3) of Division VII at registration. That situation has its own page on own-money and premium purchases.

Common mistakes

• Using an old fixed-rupee table. Earlier versions of Division VII listed flat amounts such as Rs. 10,000 or Rs. 50,000 by engine size. The table in force for tax year 2027 is a percentage of value for every band.
• Using the ex-factory price. For a locally manufactured car the proviso uses the invoice value inclusive of all duties and taxes, not a figure before taxes.
• Treating the tax as a fee. Section 231B(5) makes it adjustable advance tax. It is not a registration fee, and provincial registration fees and motor vehicle tax charged by the Excise and Taxation Department are provincial levies outside this corpus.

What to check in the official text

Read section 231B in full, especially sub-sections (1), (3), (4), (5) and (7), and the Table in clause (1) of Division VII of Part IV of the First Schedule with both provisos. The proviso to section 231B(1) stops collection after five years from the “date of first registration” as specified in clauses (a), (b) and (c) of sub-section (6). Clause (c) of sub-section (6) was omitted by the Finance Act, 2026, so check how that cross-reference reads in the official PDF before relying on it for a vehicle acquired from the Armed Forces or a diplomatic source.