ISLAMABAD: Pakistan is considering major changes to vehicle taxes under its proposed new auto policy. The plan includes a possible reduction in sales tax on electric vehicles (EVs) and new taxes on petrol-powered cars, buses and trucks.
According to details, the government is considering reducing the sales tax on electric vehicles priced up to $75,000 to 1%. This could provide tax relief worth Rs85 billion. However, the International Monetary Fund (IMF) has reportedly called for the sales tax on electric vehicles to be increased from 1% to 18%. The proposed tax relief will therefore require the lender’s approval.
Under the proposal, petrol-powered cars with engine sizes ranging from 1,001cc to 2,000cc could face a 2% Automotive Development Levy. Cars with engine sizes of 2,001cc or more may face a 10% levy. The proposed charges would apply to both locally made and imported petrol-powered vehicles.
The government is also considering a 10% Federal Excise Duty (FED) on electric vehicles worth more than Rs20 million. This means buyers of expensive electric cars could face an additional tax even if lower-priced EVs receive sales tax relief. Another proposal is to introduce a carbon levy on petrol, diesel and vehicles that run on conventional fuel engines.
According to sources, these charges could generate between Rs25 billion and Rs37 billion in revenue. However, the proposals contain both figures, and the reason for the difference is not clear. The government is also considering new charges on buses and trucks. This measure could generate an estimated Rs45 billion in revenue.
The proposed taxes and levies are part of a plan to cover the Rs85 billion in expected tax relief for electric vehicles by collecting additional revenue from other types of vehicles.
The new auto policy has not yet been finalised. The proposed taxes and relief measures remain under consideration and will require the necessary approvals, including approval from the IMF where applicable, before they can be implemented.
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