The sales of automobile industry (Local Car Manufacturers) had gone down considerably in the beginning of this year due to the power and political crises in the country and the exchequer was suffering huge losses on account of customs duty and sales tax. In order to safeguard, the revenue, the withholding tax @ 2.5% under section 231B (Advance and Adjustable) collected by the manufacturers or authorized dealers of motor car at the time of sale of motor car was suspended, initially for a period of two months i.e. February 21 to April 20, 2008. This temporary suspension of withholding tax gave good results in the shape of increase in sales of cars and consequently the Government revenue on account of collection of sales tax and customs duty also increased in March 2008 as compared to February 2008.
In view of increase in collection of customs duty and sales tax, the Government decided to extend the period of suspension of collection of advance withholding tax @ 2.5% collectable from the buyers of local motor cars upto June 30, 2008 through Notification S.R.O. No. 383(1)/2008 dated April 21, 2008.