Web Desk: Govt plans to raise sales tax on imported electric vehicles to as high as 25% in the 2026-27 federal budget, while keeping existing tax rates unchanged for hybrid vehicles, government sources said.
However, several tax incentives currently available for electric vehicles (EVs) will expire on June 30, 2026, prompting a broader review of fiscal support for the sector.
Officials said the proposed increase would apply to imported EVs in the upcoming fiscal year, signaling a shift in policy as authorities reassess revenue measures and industry protections.
At the same time, the government is considering maintaining the current concessional sales tax regime for locally produced hybrid electric vehicles, which ranges from 8.5% to 12.75% and remains valid through June 30, 2026.
Moreover, locally manufactured or assembled four-wheeled electric vehicles currently enjoy a reduced sales tax rate of 1%, a concession that will also expire at the end of June next year.
In addition, sales tax exemptions granted on the import of completely knocked down (CKD) kits for electric vehicles by local manufacturers will lapse on the same date.
Under the existing policy, the exemption applies to small cars and SUVs with battery capacity of up to 50 kilowatt-hours, as well as light commercial vehicles (LCVs) with battery capacity of up to 150 kilowatt-hours.
Meanwhile, policymakers are weighing proposals to extend customs duty concessions on the import of EV parts and components to encourage green transport and support domestic EV manufacturing.
The government also expects to introduce measures to align fiscal incentives with broader goals of promoting auto industry growth, boosting exports and accelerating the shift toward environmentally friendly transportation.
The federal cabinet approved the Electric Vehicle Policy in June 2020, allowing a five-year concessional customs duty on the import of specific parts for electric two- and three-wheelers and heavy commercial vehicles.
Subsequently, in December 2021, authorities extended similar incentives to light commercial vehicles and vans.
Under the Customs (Amendment) Bill 2026, concessional customs duty on the import of completely built-up (CBU) electric vehicles will remain in place until June 30, 2026.
However, the facility will be limited to a maximum of 10 units of a single variant for local assembly or manufacturing, and up to 200 units in the two- and three-wheeler segment.
The concession will apply only to vehicles approved and certified by the Engineering Development Board under the EV Policy 2020 framework.
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