Key Takeaways
- Prime Minister Shehbaz Sharif approved major tax relief for new energy vehicles (NEVs).
- NEVs will now face a 1 percent sales tax and be exempt from several other taxes.
- Loan limits for NEVs have been increased to Rs10 million with a loan period of five years.
Prime Minister Shehbaz Sharif has approved significant tax relief measures for new energy vehicles (NEVs) under the draft five-year Auto Policy for 2026 to 2031. The policy includes a 1 percent sales tax on NEVs and their components, while also exempting them from federal excise duty, Capital Value Tax, and Withholding Tax.
The government has also increased the loan limit for purchasing NEVs from Rs3 million to Rs10 million, with the maximum loan period extended from three years to five years. This move aims to make NEVs more accessible to a wider range of consumers.
Customs duty on imported charging stations has been set at 1 percent, and battery swap stations will receive support through viability gap funding. The policy prioritizes battery electric vehicles (BEVs) over range extended electric vehicles (REEVs) and plug-in hybrid electric vehicles (PHEVs).
During the approval process, the prime minister made several changes, including separating REEVs and PHEVs from BEVs and abolishing the proposed federal excise duty on below 1000 cc conventional cars. He also reduced the customs duty rate from 30 percent to 15 percent on all cars for the fifth year of the policy, fiscal year 2030-31.
The prime minister approved the draft policy for 2026-31, with the rates implemented from the current year to offset the impact of the delay. The policy will give the most favorable tax treatment to BEVs, followed by REEVs and PHEVs.
The decision to increase the loan limit and extend the loan period is expected to boost consumer confidence and encourage the adoption of NEVs. The government aims to leverage these incentives to promote the use of cleaner and more efficient vehicles in Pakistan.
The approval of these measures is part of a broader strategy to reduce the carbon footprint of the transportation sector and align with global trends towards sustainable mobility. The policy is designed to make NEVs more affordable and accessible, thereby contributing to the country's environmental goals.
