The Federal Board of Revenue (FBR) has revised its sales tax policy for used car auctions. The FBR has abolished the 18 percent sales tax on the auction of serviceable old and used vehicles if sales tax was previously paid at the local or import stage.

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However, sales tax will still apply to the auction of unserviceable or condemned old and used vehicles, regardless of whether sales tax was already paid when the vehicles were imported or locally purchased.

In a report submitted to the Federal Tax Ombudsman (FTO), the FBR clarified that sales tax on vehicle auctions had been evaluated based on previous Board clarifications. The FBR highlighted that while exemptions apply to serviceable vehicles auctioned by government departments or autonomous bodies (where tax was already settled at purchase), this exemption does not extend to vehicles acquired or auctioned without the appropriate sales tax payment.

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The FBR’s latest clarification specifies that 18 percent sales tax will be charged on unserviceable or condemned vehicles at auction. In contrast, no additional sales tax will be imposed on serviceable vehicles if the tax was paid during the initial purchase or import phase. The tax collected will be deposited into the federal treasury.

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