The Ministry of Industries has strongly opposed the IMF’s proposal to impose an 18 percent General Sales Tax on Electric Vehicles, arguing instead for a concessional tax rate of just 1 percent as part of the country’s upcoming auto policy.
During discussions with a visiting IMF mission, government officials presented key features of the new policy framework and proposed a 1 percent GST on New Energy Vehicles, including electric cars, buses, trucks, tractors, pickups, motorcycles, three-wheelers, and commercial vehicles.
Officials argued that hybrid vehicles already enjoy a reduced GST rate of 8.5 percent and questioned why fully electric vehicles should not receive even greater tax incentives to support adoption.
The Ministry also highlighted tax distortions within the existing supply chain. Officials noted that imported EV components are subject to a GST rate of 1 percent, while locally manufactured parts face an 18 percent GST. To avoid the accumulation of tax refunds and create a level playing field, the government proposed extending the 1 percent GST rate across the entire EV value chain.
The discussions also focused on Pakistan’s broader tariff reform commitments under the National Tariff Policy. The government has provided written assurances to the IMF that it will reduce the country’s weighted average applied tariff from 10.6 percent in FY25 to 7.4 percent by FY30.
For the auto sector specifically, planned duty reductions are expected to bring the weighted average tariff below 6 percent by 2030, reaching 5.99 percent under the current roadmap.
However, the Ministry of Industries expressed reservations about the pace of tariff liberalization. Officials argued that countries such as India and Bangladesh continue to maintain import duties of 70 percent to 80 percent on new and used vehicles to protect domestic manufacturing. The ministry maintains that Pakistan should retain higher tariff protection for the local auto industry despite the planned reductions under the National Tariff Policy.
According to officials, the new auto policy is in its final stages and will be shared with the IMF before being presented to the federal cabinet for approval. The policy envisages the gradual elimination of Additional Customs Duties and Regulatory Duties, along with significant reductions in Customs Duty rates by FY30, while remaining consistent with Pakistan’s commitments under the IMF-supported program.
Separately, the Motor Vehicle Development Act, which would provide the Engineering Development Board with statutory authority to enforce environmental and safety standards for locally manufactured and imported vehicles, has been submitted to Parliament.
The government expects the legislation to secure National Assembly approval before the end of June 2026. However, officials acknowledge that coalition partners have raised concerns over certain provisions of the proposed law.
Are we forgetting that evs get more taxes beyond gst . They get import duties and tariffs and withholding and lastly govt own taxes adding upto 200 percent
A 30 lac ev is charged 66 lac in pakistan