ISLAMABAD: The federal government has proposed imposing an Automotive Development Levy (ADL) on locally manufactured and imported vehicles with engine capacities exceeding 1,000cc as part of its proposed new auto policy.
According to reports, the government has decided to consult the International Monetary Fund (IMF) on the proposed policy, with the initial approved draft set to be submitted to the lender for consideration.
Proposed Levies on Vehicles
Under the proposal, a 2% levy could be imposed on locally manufactured vehicles with engine capacities above 1,000cc, while a levy of up to 10% has been recommended for vehicles with engine capacities of 2,001cc and above.
The government is also considering additional Federal Excise Duty (FED) on vehicles priced above Rs20 million. The matter will be discussed with the IMF before a final decision is made.
Proposed Tax Changes for Electric Vehicles
The IMF has reportedly called for an 18% sales tax on electric vehicles (EVs). However, the government has proposed alternative revenue measures to offset the potential loss of tax revenue while keeping taxes lower on more affordable electric cars.
Under the alternative proposal, a 10% Federal Excise Duty could be imposed on electric vehicles valued at more than $75,000. The measure could help reduce the sales tax rate on lower-priced electric vehicles to 1%, according to the report.
Revenue Projections
Government estimates suggest that revenue from levies on vehicles could increase significantly over the next five years.
Revenue collected through levies on cars could rise from Rs37 billion to Rs188 billion, while collections from buses and trucks could increase from Rs45 billion to Rs232 billion over the same period.
The proposals are part of the government’s efforts to revise the country’s automotive taxation framework. The measures remain subject to further consultations with the IMF and the government’s final approval.
