ISLAMABAD: The Federal government is considering ending the reduced sales tax rate on electric vehicles (EVs), a move that could increase the tax on a Rs10 million electric vehicle from Rs100,000 to as much as Rs1.8 million.
According to sources, Pakistan and the International Monetary Fund (IMF) are currently engaged in negotiations over the country’s loan programme, while work is underway on a draft of the new auto policy in light of the IMF’s concerns.
Sources said the IMF has called for the withdrawal of the concessional sales tax rate currently applicable to electric vehicles.
The IMF’s position is that electric vehicles are considered luxury items rather than essential goods for lower-income groups, and therefore should not receive preferential tax treatment.
Following the IMF’s objections, a proposal is under consideration to increase the sales tax on electric vehicles from 1% to 18%. A similar increase in sales tax on EV charging stations, from 1% to 18%, is also being considered.
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Sources said the draft auto policy will be presented to Prime Minister Shehbaz Sharif soon, while the prime minister will also be briefed on the IMF’s objections and proposed changes to the policy.
Under the proposed tax structure, a Rs10 million electric vehicle currently subject to 1% sales tax would face a tax of up to Rs1.8 million if the rate is increased to 18%. This would represent a significant increase from the existing Rs100,000 tax.
Officials said the IMF’s concerns will be incorporated into the new auto policy before the draft is submitted to the prime minister for final approval.
The proposed changes are part of broader efforts to align Pakistan’s auto sector and taxation policies with the conditions and concerns raised during ongoing discussions with the IMF.
