ISLAMABAD, Oct 1: The Central Board of Revenue (CBR) has clarified that no sales tax registration will be required in cases where vehicle registrations are directly transferred from one person to another by the motor registration authorities.

An official announcement issued here on Saturday said that the special procedures for collection of sales tax on motor cars and motor cycles has an in-built equity aimed at promoting documentation of the business of auto dealership in the country without any discrimination or proneness to tax avoidance.

Under the procedure all assemblers, importers and dealers of vehicles are obliged to get registration and pay sales tax due on their taxable transactions under Sales Tax Law.

The CBR also clarified that no fresh sales tax was levied on the vehicles. The only problem being faced by the automobiles sector was that the car dealers were not able to avail input tax adjustment in case of old and used vehicles sold by them usually on commission basis because they did not have purchase sales tax invoices in respect of such vehicles.

Under the Sales Tax Act, 1990, being commission agents, car dealers were required to obtain sales tax registration even in the past and pay sales tax on the sale of motorcars or motorcycles sold by them either on commission basis or otherwise.

The present new procedure has not imposed any new tax on car dealers. Instead it has facilitated them in their efforts to comply with sales tax laws availing an extraordinary facility of notional input tax adjustment in cases where they do not have back up sales tax invoices in their names for old and used vehicles.

This facility is an exceptional arrangement under which only 10 per cent of the sale price of the second hand vehicles including commission amount, if any, is liable to sales tax at the rate of 15 per cent and 90 per cent component of their sale price shall not attract sales tax. This formula shall be applicable even in cases where second-hand vehicles are brought to the registration authorities for transfer of registration without the involvement of car dealers, added the announcement.