Key Takeaways
- The federal government has rejected an IMF proposal to impose 18% sales tax on electric vehicles.
- The draft Auto Policy 2026-31 includes phased customs duty cuts on eligible imported electric cars.
- Prime Minister Shehbaz Sharif approved the draft policy on Tuesday.
The federal government has rejected an International Monetary Fund (IMF) proposal to impose an 18% sales tax on electric vehicles (EVs) under the new Auto Policy 2026-31, according to ProPakistani. The decision comes as part of the government's efforts to promote electric mobility in the country.
Under the proposed policy, customs duty on eligible electric vehicles priced up to $75,000 will be reduced from 50% to 25% initially, with a further cut to 15% planned by fiscal year 2030-31. The draft policy also includes a 6% sales tax on range-extended electric vehicles and a 9% sales tax on plug-in hybrid vehicles and other alternative-energy vehicles.
Prime Minister Shehbaz Sharif approved the draft Auto Policy 2026-31 on Tuesday. The six-year framework aims to encourage electric mobility through changes in vehicle taxation, including lower import duties on eligible electric cars. Sources have stated that the customs duty reductions will be implemented in phases during the policy period.
The government's decision to reject the IMF proposal is seen as a step towards making EVs more affordable for the Pakistani market. The phased reductions in customs duties are expected to gradually lower the cost of imported electric vehicles, making them more accessible to the general public.
The draft policy also includes provisions for the introduction of a 6% sales tax on range-extended electric vehicles and a 9% sales tax on plug-in hybrid vehicles. These measures are intended to differentiate between fully electric and hybrid vehicles, reflecting their varying levels of environmental impact and technological development.
The government's approach to electric vehicles is part of a broader strategy to reduce reliance on fossil fuels and promote sustainable transportation. By reducing import duties and introducing targeted sales taxes, the policy aims to create a conducive environment for the adoption of electric vehicles in Pakistan.
The draft policy is expected to have a significant impact on the automotive industry, potentially leading to increased competition and innovation in the market. Manufacturers and importers of electric vehicles are likely to benefit from the reduced customs duties, which could lead to lower prices for consumers.
The government's decision to reject the IMF's 18% sales tax on electric vehicles is seen as a positive step towards promoting the use of clean energy vehicles in Pakistan. The phased reductions in customs duties are expected to make electric vehicles more affordable and accessible to a wider range of consumers.
