Pakistan is considering ending the sales tax concession on electric vehicles (EVs), a move that could increase the tax on a Rs10 million electric car from Rs100,000 to as much as Rs1.8 million.
According to sources, Pakistan and the International Monetary Fund (IMF) are currently engaged in talks over the country’s loan programme, while work is underway on a draft of the new auto policy in light of the IMF’s concerns.
Sources said the IMF has called for the withdrawal of the reduced sales tax rate currently applicable to electric vehicles.
The IMF’s position is that electric vehicles are considered luxury items rather than essential goods for lower-income groups and, therefore, should not receive preferential tax treatment.
Following the IMF’s objections, a proposal is reportedly under consideration to increase the sales tax on electric vehicles from 1% to 18%. The sales tax on EV charging stations could also be increased from 1% to 18%.
Sources said the revised auto policy, incorporating the IMF’s concerns, is expected to be presented to Prime Minister Shehbaz Sharif soon. The prime minister will also be briefed on the IMF’s objections to the proposed policy.
Officials said that if the sales tax on a Rs10 million electric vehicle is increased from 1% to 18%, the tax liability would rise from Rs100,000 to Rs1.8 million.
According to officials, the draft of the new auto policy will be presented to the prime minister for final approval after incorporating the IMF’s reservations.
