Pakistan Weighs Alternative EV Taxes New Auto Policy

ISLAMABAD: Pakistan has decided to consult the International Monetary Fund (IMF) on its new automobile policy, with the initial approved draft set to be shared with the global lender.

The IMF has reportedly called for an 18% sales tax on electric vehicles (EVs). However, Pakistan is considering alternative revenue measures to offset potential tax losses instead of imposing the proposed 18% sales tax on EVs.

According to a policy document, the government has proposed a 10% Federal Excise Duty (FED) on electric vehicles valued at more than $75,000. The proposed levy is intended to help reduce the sales tax rate to 1% on EVs priced below $75,000.

The government will also consult the IMF on imposing additional Federal Excise Duty on vehicles valued at more than Rs20 million.

The draft policy further proposes an Automotive Development Levy (ADL) on locally manufactured and imported vehicles with engine capacities exceeding 1,000cc.

According to estimates, revenue from the Automotive Development Levy on cars could increase from Rs37 billion to Rs188 billion over the next five years. Meanwhile, the levy on buses and trucks could generate between Rs45 billion and Rs232 billion during the same period.

The proposal also includes a 2% Automotive Development Levy on locally manufactured vehicles with engine capacities exceeding 1,000cc, while a 10% levy has been proposed for locally manufactured vehicles with engine capacities of 2,001cc and above.

The proposed measures are aimed at balancing revenue requirements with the promotion of electric mobility and the development of Pakistan’s automotive industry. The final policy will be shaped through consultations with the IMF.

Prime Minister’s Office Approves Draft Auto Policy

Prime Minister Shehbaz Sharif on Tuesday approved the draft Auto Policy 2026-31, which aims to increase auto sector exports to $6 billion and boost local production, competitiveness and electric vehicle (EV) adoption.

Although the Prime Minister’s Office did not issue an official statement, sources in the federal government shared the final draft, which was presented to the premier by Law Minister Azam Nazeer Tarar and Adviser on Industries and Production Haroon Akhtar.

The draft policy will be presented to the federal cabinet for in-principle approval, then it will need parliament’s nod. The policy aims to bring the auto sector to open competition by significantly reducing tariffs on completely built-up units (CBUs) and completely knocked-down (CKD) kits up to 15pc by 2030-31.