ISLAMABAD (Kashmir English): The federal government is likely to increase the sales tax on imported electric vehicles (EVs) to 25 percent in the budget for fiscal year 2026-27.
Reports said the move is being considered as several tax exemptions and incentives currently available to the electric vehicle sector are scheduled to expire on June 30, 2026.
Among the incentives nearing expiry is the sales tax exemption on the import of complete knockdown (CKD) kits used by local manufacturers for the assembly of electric vehicles.
The exemption currently applies to small passenger vehicles and SUVs with battery capacities of up to 50 kilowatt-hours, as well as light commercial vehicles with battery capacities of up to 150 kilowatt-hours.
At present, locally manufactured or assembled four-wheeled electric vehicles are subject to a reduced sales tax rate of just one percent, a concession that is also set to expire at the end of the current fiscal year.
Sources said the government is, however, likely to retain the existing concessional EV import sales tax. Under the current framework, locally manufactured hybrid vehicles enjoy reduced sales tax rates ranging from 8.5 percent to 12.75 percent.
Officials said the proposed measures are part of broader efforts to align incentives for industrial development, export promotion and environmentally friendly transportation under the country’s evolving auto policy.
The government is also considering extending customs duty concessions on the import of electric vehicle parts and components to support local manufacturing and encourage the adoption of green transportation technologies.
Pakistan’s Electric Vehicle Policy, approved by the federal cabinet in 2020, introduced a range of incentives including reduced customs duties on parts used in electric two-wheelers, three-wheelers and heavy commercial vehicles. These incentives were later expanded in 2021 to include light commercial vehicles and electric vans.
Sources added that customs duty concessions on the import of completely built electric vehicles (CBUs) are expected to remain in place until June 30, 2026.
Under the existing policy, the concession applies to a maximum of 10 vehicles of a single variant for local assembly or manufacturing and up to 200 units in the two- and three-wheeler category.
The facility is available only to vehicles approved and certified by the Engineering Development Board under the EV Policy 2020.
The final decision regarding tax rates and incentives will be announced as part of the federal budget for the upcoming fiscal year.
