Pakistan’s auto industry is facing a crisis as the government plans to increase the goods and services tax (GST) on small size sedans from 17% to 25%.

This move could have disastrous consequences for the economy, the consumers, and the investors, according to the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM).

The PAAPAM leadership warned that the GST hike would make the locally assembled cars unaffordable for the country’s middle class, who are already struggling with hyperinflation and slowdown.

They said that this would not only harm the customer’s welfare, but also reduce the tax revenue for the government, as the demand for cars would plummet.

The PAAPAM urged the authorities to reconsider their decision and not to impose further taxes on the auto industry, which is one of the key sectors of the economy.

They said that they had already rejected this proposal when it was discussed with them earlier, and they requested for dialogues with the government before any final decision is made.

The PAAPAM said that the GST hike would also discourage the investors from investing in Pakistan’s auto industry, which is already facing challenges such as low localization, high import duties, and regulatory uncertainty.

They said that the government should instead support the industry by providing incentives, facilitating technology transfer, and ensuring a level playing field.