Govt sets 20% tax on AC, motorbike, freezer manufacturers

The government has set the income tax rate at 20% on the earnings of industries engaged in the production of freezers, refrigerators, motorcycles, air conditioners, and compressors, including spare parts. A gazette notification, signed by NBR Chairman Abdur Rahman Khan, was issued in this regard on Tuesday.

Currently, these industries pay a 10% income tax and a 2% advance income tax (AIT) on the import of machinery, parts, and equipment.

The notification states that this directive from the NBR will take effect from the 2025-2026 fiscal year and will remain in force until June 30, 2032. The notification outlines several conditions.

An NBR official, speaking on condition of anonymity, told Jago News that the government has been offering tax exemptions to these industries for a long time. Typically, these industries are required to pay a corporate tax rate of 20-22%. However, these industries have now become relatively self-sufficient. To protect domestic industries and support their self-reliance, the tax rate had been reduced over time. This reduction has now been reversed, meaning the tax exemptions have been withdrawn by the NBR.

On October 19, 2021, the NBR issued an order granting tax exemptions to companies involved in the production of complete refrigerators, motorcycles, air conditioners, compressors, and spare parts. Under this order, these companies were required to pay tax at a reduced rate of 10%, subject to specific conditions, until June 30, 2032. From the date of production, these companies had to pay a 10% tax on their income. Prior to this, since 2009, the NBR had been offering tax exemptions to these sectors, with a tax rate of 5% at that time.