Senate Committee Opposes Increasing Tax on Electric, Hybrid Cars in Budget 2024-25

A meeting of the Senate Standing Committee on Finance and Revenue was held under the chairmanship of Senator Saleem Mandviwala today to discuss various tax proposals in the Finance Bill 2024.

Senator Faisal Vawda opposed increasing the tax rates on electric and hybrid vehicles, arguing that this technology was being encouraged all over the world. He lamented that unexpected policy changes were creating problems, mentioning the 25 percent sales tax on vehicles worth over Rs. 15 million. He further complained about the discrepancy in tax rates between imported and locally manufactured vehicles.

Vawda said if someone’s shipment was due in the next six months, they didn’t even know about the new policy. This means individuals expecting a delivery in six months would have to pay the new tax.

The committee postponed this matter for further discussion.

In last week’s Finance Bill, the federal government proposed withdrawing tax exemptions enjoyed by electric cars valued above $50,000.

Imported electric vehicles (EVs) in Pakistan previously enjoyed tax benefits to promote their adoption. However, EVs valued above $50,000 have been proposed to be taxed like regular cars. This new policy will impact high-end models such as the Audi e-Tron/e-Tron GT and BMW i8. In contrast, more affordable EVs like the MG ZS EV, MG4 EV, and Rinco Aria, priced below $50,000, will likely remain unaffected.

The government has also proposed an increase in withholding tax charged on non-electric cars.

Overall, this will make cars more expensive for the masses who are already struggling with record levels of inflation.