Pakistan May Impose Higher Sales Tax on Imported EVs in Budget 2026-27

The federal government is expected to introduce changes to the taxation of electric vehicles (EVs) in the upcoming budget for the fiscal year 2026-27. According to reports, a sales tax of up to 25 percent may be imposed on imported EVs in budget 2026-27, while tax rates on hybrid vehicles are likely to remain unchanged.

The proposed changes come as several tax exemptions related to the automobile sector are scheduled to expire on June 30, 2026. These incentives were introduced to support the growth of environmentally friendly transportation and encourage investment in the local automotive industry.

Pakistan May Impose Higher Sales Tax on Imported EVs in Budget 2026-27

At present, local manufacturers importing completely knocked down (CKD) kits for electric vehicles enjoy sales tax exemptions. These kits are used to assemble vehicles within Pakistan and have played an important role in supporting local EV production. The exemption currently applies to small electric cars and sport utility vehicles (SUVs) with battery capacities of up to 50 kWh, as well as light commercial vehicles (LCVs) with batteries of up to 150 kWh.

Another key incentive currently available is a reduced sales tax rate on locally assembled electric vehicles. Buyers of qualifying electric four-wheelers currently pay only 1 percent sales tax. This concession has helped make EVs more affordable and attractive to consumers who are considering switching from conventional fuel-powered vehicles.

Hybrid vehicles have also benefited from lower tax rates. Depending on the vehicle type, sales tax rates ranging from 8.5 percent to 12.75 percent have been applied to locally manufactured hybrid models. Sources suggest that these reduced rates may continue in the next fiscal year, providing stability for both manufacturers and buyers in the hybrid vehicle market.

The government’s broader strategy is linked to the Automotive Industry Development and Export Policy (AIDEP) 2021-26. This policy was designed to promote local manufacturing, increase exports, and support the adoption of cleaner transportation technologies. To support these goals, various customs duty concessions and tax incentives were introduced for electric vehicles and their components.

Recently, the Senate Standing Committee on Finance approved amendments to customs laws aimed at implementing the financial provisions of AIDEP. These amendments are intended to ensure that incentives remain aligned with the objectives of the policy while supporting the development of Pakistan’s EV industry.

See Also: Government Eyes EV Boom with New Automotive Policy Framework

The government’s efforts to promote electric mobility began with the approval of the national EV policy in June 2020. Under that policy, reduced customs duties were granted on EV-specific parts and components for electric motorcycles, rickshaws, buses, trucks, and other commercial vehicles. The incentives were designed to lower manufacturing costs and encourage investment in clean transportation solutions.

Later, the AIDEP policy expanded these benefits to include light commercial vehicles and vans. The proposed amendments now seek to ensure consistency between the customs concessions offered under the EV policy and those provided under AIDEP.

In addition, customs duty concessions on the import of completely built electric vehicles (CBUs) are expected to continue until June 30, 2026, under specific conditions. These concessions are available for approved vehicle models that manufacturers plan to assemble locally in the future.

The upcoming budget will be closely watched by automakers, investors, and consumers alike. The final decisions on EV and hybrid vehicle taxation could significantly influence the future growth of Pakistan’s automotive sector and its transition toward cleaner and more sustainable transportation.