Is advance tax collected when I buy from the manufacturer and again when I register the car?

Buyers of new cars often see income tax on the manufacturer’s invoice and then worry that the Excise and Taxation office will charge it again at registration. Section 231B of the Income Tax Ordinance, 2001, as amended to 30 June 2026, answers this directly. The rates on this page are those for tax year 2027 (1 July 2026 to 30 June 2027).

What does the law say?

Section 231B contains two collection points for the same tax.

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

Section 231B(4) then links the two. Sub-section (1) does not apply if a person produces evidence that tax under sub-section (3) was collected from the same person in respect of the same vehicle, for a locally manufactured vehicle. The same relief exists for an imported vehicle where tax under section 148 was collected at import.

So the Ordinance does not intend the same buyer to pay twice on the same car. The switch that turns off the second collection is evidence.

How does it work in practice?

Both collection points use clause (1) of Division VII, which sets a percentage of the vehicle’s value by engine capacity:

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

For a locally manufactured or assembled car, the first proviso to clause (1) makes the value the invoice value inclusive of all duties and taxes.

The sequence for a buyer is:

1. The manufacturer collects the tax at the time of sale under section 231B(3) and it appears on the sale documents.
2. At registration, the buyer produces evidence of that collection.
3. Under section 231B(4), the registering authority does not collect again under section 231B(1).
4. Under section 231B(5), the tax already paid is adjustable against the buyer’s income tax for the year.

Section 231B(4) does not say what form the evidence must take. It only requires that the person “produces evidence”. This page does not describe the Excise office’s documents or procedure, which are outside this corpus.

Worked example (illustrative figures)

Bilal in Karachi buys a locally assembled 1,496cc sedan. The invoice value inclusive of all duties and taxes is Rs. 6,500,000. He appears in the active taxpayers’ list.

1. Engine band: 1301cc to 1600cc, so the rate is 2%.
2. Tax at sale under section 231B(3): Rs. 6,500,000 x 2% = Rs. 130,000.
3. At registration in Karachi he produces evidence that the Rs. 130,000 was collected from him for this car. Section 231B(4) applies, so the registration collection under section 231B(1) is nil.
4. Total advance tax under section 231B on this car: Rs. 130,000, adjustable under section 231B(5).

If Bilal did not appear in the active taxpayers’ list, the first proviso to rule 1 of the Tenth Schedule increases tax under section 231B by two hundred percent of the First Schedule rate. The 2% rate plus 200% of 2% gives 6%, so the manufacturer would collect Rs. 6,500,000 x 6% = Rs. 390,000.

What if I cannot produce the evidence at registration?

Section 231B(4) is worded as a condition: sub-section (1) does not apply “if a person produces evidence”. Read on its own terms, without that evidence the registering authority’s duty under section 231B(1) stays in place. Both amounts would then be advance tax under the same section, and section 231B(5) makes advance tax collected under the section adjustable. The Ordinance does not set out a separate procedure for reversing a second collection, and this page does not supply one.

What if the vehicle is not a car or jeep?

Section 231B(3) applies to the manufacturer’s sale of a “motor car or jeep”. A locally made pickup, van or wagon sold for private use falls within the wider definition of motor vehicle in section 231B(7), but the manufacturer’s duty in sub-section (3) is limited to cars and jeeps. For such vehicles the collection point in the text is registration under section 231B(1).

What if the first buyer sells the car before registering it?

Section 231B(4) only helps where tax was collected from the same person for the same vehicle. A person who buys the car from the original buyer before registration is not that person. Section 231B(2A) adds a separate fixed tax at registration in that situation, covered on the own money page linked below.

Common mistakes

• Assuming the Excise office will know tax was paid. Section 231B(4) puts the burden on the person to produce evidence.
• Registering in a relative’s name. The relief requires collection “from the same person”. If the invoice is in one name and registration in another, section 231B(4) as worded does not cover the second person.
• Treating the invoice amount as a fee. It is adjustable advance income tax under section 231B(5), not a sales tax or a provincial registration charge.

What to check in the official text

Read section 231B(1), (3), (4) and (5) together, and the Table in clause (1) of Division VII of Part IV of the First Schedule with its first proviso on value. Check the first proviso to rule 1 of the Tenth Schedule for the rate applying to a person not in the active taxpayers’ list. Provincial registration fees and motor vehicle tax charged by the Excise and Taxation Department are provincial levies and are not covered here.