The Federal Board of Revenue (FBR) has announced a new tax on luxury goods, which will come into effect on March 8th, 2023. The tax will be a 25 percent sales tax, and will be applied to a range of items including aerated water, confectionary, crockery, furniture, home appliances, jewelry, cosmetics, cigarettes, and vehicles.
The FBR’s decision to introduce this tax is aimed at generating additional revenue for the government, and reducing the country’s reliance on foreign loans. The tax will be imposed on both imported and locally produced goods.
The list of items that will be subject to the 25 percent sales tax includes
- Aerated water and juices
- Confectionary,
- Vehicles in Completely Built Up (CBU) condition,
- Sanitary and bathroom wares,
- Carpets,
- Chandeliers and lighting devices or equipment,
- Chocolates,
- Cigarettes,
- Cigars and e-cigarettes, corn flakes and other ready-to-use cereals,
- Cosmetics and shaving items, tissue papers,
- Crockery, kitchenware, tableware, and household articles,
- Decorations or ornamental articles,
- Dog and cat food,
- Doors and window frames,
- Fish,
- Footwear,
- Fruits and dry fruits, furniture,
- Home appliances CBU,
- Ice cream, jams,
- Jellies,
- Preserved fruits and fruit and vegetable juices,
- Leather jackets and apparel,
- Mattress and sleeping bags,
- Fresh, chilled,
- Frozen, preserved, or processed meat,
- Musical instruments, pasta,
- Arms and ammunition (excluding defense stores),
- Shampoos,
- Sunglasses,
- Tomato ketchup and sauces,
- Ships designed for recreation or private use,
- Aircraft designed for recreation or private use,
- Articles of jewelry, and wristwatches.
In addition to the above items, the new tax will also be applied to locally manufactured or assembled SUVs and CUVs, vehicles with engine capacity of 1400cc and above, and double cabin (4×4) pick-up vehicles.
The introduction of this tax is likely to increase the cost of luxury goods for consumers, as businesses are likely to pass on the additional costs to their customers. The impact of the tax on the economy as a whole is yet to be seen, but it is expected to generate additional revenue for the government, which could be used to support development projects and social welfare initiatives.