Web Desk: Pakistan is considering a sharp increase in the sales tax on electric vehicles as it works with the International Monetary Fund on changes to its automotive policy, a move that could significantly raise the cost of EVs for consumers.
Under the proposal being considered, the sales tax on electric vehicles could rise from the current 1% rate to 18%, while a similar increase could apply to EV charging stations.
The potential changes are being discussed as Pakistan and the IMF continue negotiations under the country’s loan programme.
According to officials familiar with the discussions, the IMF has objected to preferential sales tax treatment for electric vehicles and has called for the concession to be withdrawn.
The IMF’s position, according to the sources, is that electric vehicles are not a basic necessity for lower-income households and should therefore not receive a reduced tax rate.
The objections have been incorporated into discussions over a revised automotive policy that is now being drafted.
If approved, the proposed change could substantially increase the tax burden on electric vehicle buyers.
For example, an EV priced at 10 million Pakistani rupees would currently attract about 100,000 rupees in sales tax at a 1% rate. Applying an 18% rate would increase the tax to about 1.8 million rupees, based on the same vehicle value.
The proposal could therefore add a significant upfront cost to electric vehicles and potentially affect demand in a market that Pakistan has sought to develop through tax incentives.
The proposed policy changes could extend beyond vehicle purchases.
Officials said the government is also considering raising the sales tax on electric vehicle charging stations from 1% to 18%. The move would increase the tax burden on infrastructure supporting the country’s transition toward electric mobility.
However, the proposals have not yet been finalised.
Officials said the revised automotive policy is being prepared after taking the IMF’s concerns into account.
Once the draft is completed, it is expected to be presented to Prime Minister Shehbaz Sharif, who will also be briefed on the IMF’s objections and the proposed changes.
The government is expected to make a final decision after reviewing the revised policy and completing consultations with relevant stakeholders.
Until the policy receives final approval, the proposed increase in EV sales tax remains under consideration rather than a confirmed change in Pakistan’s tax regime.
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