Urdu Report Desk
Pakistan’s proposed new auto policy includes a sales tax relief package worth Rs85 billion for electric vehicles (EVs), with the government considering alternative revenue measures to compensate for the potential loss in tax receipts.
According to sources, the proposal would reduce sales tax on electric vehicles priced up to $75,000 to 1%. The International Monetary Fund (IMF), however, has called for the sales tax rate on electric vehicles to be increased from 1% to 18%.
The proposed measures are still under consideration, and their implementation will depend on the IMF’s approval.
Automotive Development Levy on Petrol Vehicles
The proposed policy also includes an Automotive Development Levy on petrol-powered and other internal combustion engine vehicles, covering both locally manufactured and imported cars.
Under the proposal, vehicles with engine capacities ranging from 1,001cc to 2,000cc could face a levy of 2%, while vehicles with engine capacities of 2,001cc or above could be subject to a 10% levy.
The measures are intended to generate revenue to offset the proposed tax relief for electric vehicles.
Proposed Federal Excise Duty on Expensive EVs
Sources said the government is also considering imposing a 10% Federal Excise Duty on electric vehicles valued at more than Rs20 million.
The proposed policy is also expected to retain the carbon levy on petrol, diesel and other internal combustion engine vehicles.
Expected Revenue From Levies
Under the proposed arrangements, the carbon levy on petrol and diesel vehicles is projected to generate Rs25 billion, while total revenue from levies is estimated at Rs37 billion.
The Automotive Development Levy on buses and trucks is expected to generate an additional Rs45 billion, according to sources.
These measures would form part of the alternative revenue plan intended to compensate for the proposed Rs85 billion in sales tax relief for electric vehicles.
Finance Bill Amendments Under Consideration
Sources said amendments to the Finance Bill may be introduced to finalise the proposed measures.
However, the proposals have not yet been approved. The final decision on the new auto policy measures will depend on the IMF’s approval.
