NA Panel Approves Special Excise Duty on EVs, Luxury SUVs

The National Assembly Standing Committee on Finance and Revenue has approved the imposition of special excise duty on electric vehicles and luxury sport utility vehicles on the basis of their dollar value, as it finalized recommendations on the Finance Bill 2026-27 ahead of the budget’s passage by the lower house.

The committee completed a 15-page report containing amendments to the finance bill, including proposals related to imported vehicles, minimum tax on a range of consumer goods, taxation of the steel sector, mobile phone import payments, and data-sharing arrangements aimed at identifying potential tax evaders.

The National Assembly was set to take up the Finance Bill 2026-27 for approval on Tuesday. The government has already informed the IMF and parliamentarians that 26 additional measures, including policy changes, enforcement steps, and higher tax rates, are expected to generate Rs. 1,020 billion for the Federal Board of Revenue in the next fiscal year.

The FBR has been assigned a tax collection target of Rs. 15.264 trillion for 2026-27, against the revised target of Rs. 12.983 trillion for the outgoing fiscal year ending on June 30, 2026.

Under the committee’s approved proposals, imported electric cars and electric SUVs in completely built-up condition valued at up to $75,000 would remain exempt from the new tax. Vehicles valued above $75,000 and up to $110,000 would face a 30 percent ad valorem tax, while those valued above $110,000 would be subject to a 40% ad valorem tax.

For imported motor cars, SUVs and other passenger vehicles, excluding auto-rickshaws, with engine capacity of 2,000cc and above but not exceeding 3,000cc, an ad valorem tax rate of 86% has been proposed. For vehicles with engine capacity above 3,000cc, the tax rate would be 9%c.

The government has also proposed reducing regulatory duty on imported vehicles and offsetting the revenue loss through the new excise duty. The move has raised concerns among local assemblers and auto parts makers, who say the forthcoming auto policy has effectively been diluted.

The committee also approved a minimum tax rate of 0.5% under Section 113 for distributors, dealers, sub-dealers and wholesalers dealing in 14 categories of goods. These include pharmaceuticals, fertilizer, cigarettes, sugar, locally manufactured mobile phones, fresh and frozen food in packaged form, electronics, beverages and dairy products, pasta, cereals, biscuits, nuts, snacks, condiments, baking items, skincare and cosmetics, hair care, oral care, baby care, cleaning products, tissue paper products, trash bags, aluminium foil, air fresheners and insect sprays.

It also finalized a proposal to impose a 5% withholding tax on revenues received from social media platforms.

For the steel sector, the committee approved a mechanism under which tax would be collected from steel melters, steel re-rollers and composite units on the basis of per-unit electricity consumption, including electricity generated through captive power plants or alternative energy sources, at rates to be notified by the board.

The tax so collected would be adjustable as input tax in the return for the month in which payment is made. The board would also be allowed to prescribe lower rates of electricity consumption for compliant and digitally integrated units to minimise refund claims. Per-unit sales tax would be linked to the minimum notified price and industrial benchmarks for electricity consumption per tonne of steel produced.

The committee further approved sales tax exemption for aircraft of PIACL, while exemption on the import or lease of aircraft and related parts by any airline registered in Pakistan would take effect from July 1, 2027.

It also allowed individuals liable to pay tax on imported mobile phone devices through the PTA’s device identification, registration and blocking system to pay the tax in instalments, provided all instalments are cleared before the end of the financial year in which the import is made.

Under another provision, manufacturers would be liable to pay a 3% value addition tax on imports on an ad valorem basis, along with a default surcharge, if imported goods are supplied in the same state, whether in the same packing, repacked, or in bulk.

The committee also approved a minimum value addition tax of 1% on coal imports, subject to the condition that the imported coal is exclusively and directly supplied to independent power producers.

To facilitate data sharing to identify potential tax evaders, the committee approved a proposal allowing the State Bank of Pakistan to establish, operate, and maintain a secure centralised virtual repository of banking data. The repository would contain prescribed information, records and financial transactions of persons maintained by scheduled banks on the basis of unique identifiers. It would provide data and results as required by the FBR.

A penalty of Rs. 500,000 for the first default and Rs. 1 million for every subsequent default would be imposed on the principal officer, chief executive officer, member of an association of persons, or sole proprietor in case of non-compliance under the relevant provisions.