Pakistan Govt Rejects IMF’s 18% Sales Tax Proposal for EVs

ISLAMABAD: The federal government has rejected the International Monetary Fund’s (IMF) proposal to impose an 18% sales tax on electric vehicles under the proposed Auto Policy 2026–31. The government is also planning to gradually reduce customs duties on eligible imported electric vehicles.

According to reports, the proposed six-year auto policy aims to promote electric vehicles in Pakistan by changing vehicle taxes and reducing import duties on qualifying vehicles.

Under the draft policy, the government plans to reduce customs duty on eligible imported electric vehicles priced up to $75,000 from 50% to 25% initially. The duty would then be reduced gradually to 15% by fiscal year 2030–31.

The draft also proposes a 6% sales tax on range-extended electric vehicles and a 9% sales tax on plug-in hybrid vehicles. The government is also considering different tax rates for other types of vehicles that use alternative energy sources.

Media reports said Prime Minister Shehbaz Sharif approved the draft of the Auto Policy 2026–31 on Tuesday.

The six-year policy aims to encourage the use of electric vehicles in Pakistan through changes in vehicle taxation and a gradual reduction in import duties on eligible imported models.

These measures are intended to support the shift towards electric transport. However, the final tax rates and implementation details will depend on the approved policy and subsequent government decisions.