The Pakistani automobile industry is sounding the alarm, expressing serious concerns that a proposed increase in General Sales Tax (GST) within the upcoming budget for fiscal year 2025-26 could trigger a substantial decline in auto sales. Such a move, industry leaders caution, would cast a long shadow over Original Equipment Manufacturers (OEMs) and their extensive network of vendors.
Hiroshi Kawamura, Managing Director of Pak Suzuki Motor Company, articulated the profound negative impact of an 18% GST. According to informed sources, he highlighted that this hike would not only dampen sales but also adversely affect employment across the entire automotive value chain. Kawamura emphasized that economic growth had been sustainable with a 12% sales tax, and any further increment would undeniably ripple through the entire auto industry. The sector currently supports approximately 2.5 million direct and indirect jobs, a number that he believes could further expand if the 12.5% GST rate is maintained in this category.
Mr. Kawamura conveyed these concerns directly to Special Assistant to Prime Minister on Industries, Haroon Akhtar Khan, during a Tuesday meeting focused on the potential impact of the budget and the proposed new tariff policy. “The impact of higher sales tax is always borne by customers,” Kawamura remarked, voicing particular apprehension over the proposed increase in sales tax on vehicles below 850cc engine capacity, from 12.5% to 18%. He warned that such measures could severely undermine the sector, leading to escalated vehicle prices, reduced affordability for consumers, and a dampening of overall market demand. This price increase, he stressed, could also impede industry growth and intensify production pressures.
In response, the Prime Minister’s aide reaffirmed the government’s unwavering commitment to supporting the auto industry. He assured Mr. Kawamura that Prime Minister Shehbaz Sharif is keenly aware of the sector’s challenges and is deeply committed to its continued growth. “Progress demands unity and collaboration. The auto industry is a vital source of employment and local manufacturing strength,” Haroon Akhtar remarked. He pledged that the Prime Minister would not allow the sector to falter and assured continued engagement with industry stakeholders to help navigate challenges and seize growth opportunities.
In a separate but equally significant meeting, the Prime Minister’s special assistant met with Danial Malik, CEO of Master Changan Motors. Their discussions centered on the strategic challenges confronting the auto industry and the potential implications of the budget. A key point of deliberation was the national priority of transitioning to New Energy Vehicles (NEVs), particularly electric vehicles. Malik underscored the critical need for sustained policy support and industry friendly measures to foster a stable and growth oriented environment.
Haroon Akhtar reaffirmed the government’s steadfast commitment to implementing a sustainable and modern auto policy that aligns with global trends. He excitingly announced that the much anticipated Electric Vehicle (EV) policy would be unveiled soon. “The prime minister envisions a globally competitive auto industry,” he stated. “Our EV policy will provide a comprehensive framework for infrastructure development, investment incentives, and policy facilitation.” He further added that special incentives would be introduced to promote the widespread adoption of EVs, which will serve as a cornerstone for long term industrial growth and paramount environmental sustainability.
