The government is likely to impose up to 25 percent sales tax on imported electric vehicles in Budget 2026-27. However, officials are expected to keep existing tax rates on hybrid vehicles unchanged.
The proposed measure comes as several tax exemptions for electric vehicles approach their expiry date. Most of these incentives are scheduled to end on June 30, 2026.
According to sources, current exemptions on imported completely knocked down (CKD) kits for EV manufacturers will lapse. These incentives presently support local assembly and manufacturing activities.
EV Tax Exemptions Near Expiry
The existing exemption covers small electric cars and SUVs with battery capacities up to 50 kWh. It also applies to light commercial vehicles with batteries up to 150 kWh.
Currently, locally assembled four-wheeler EVs benefit from a reduced sales tax of just 1 percent. This concession remains valid until June 30, 2026.
In contrast, hybrid electric vehicles are subject to sales tax rates ranging from 8.5 percent to 12.75 percent. Sources indicate these rates will likely continue during the next fiscal year.
Industry stakeholders are closely monitoring the proposed tax changes. Consequently, the upcoming budget could significantly affect EV affordability in Pakistan.
Government Continues Support for Local EV Manufacturing
Meanwhile, the Senate Standing Committee on Finance approved the Customs (Amendment) Bill, 2026. The legislation supports the implementation of the Automotive Industry Development and Export Policy.
The government has also proposed extending customs duty concessions on EV parts and components until June 30, 2026. Officials say the move aims to encourage green transportation and local manufacturing.
Furthermore, authorities plan to continue concessions for electric two-wheelers, three-wheelers, and heavy commercial vehicles. These incentives align with the Automotive Industry Development and Export Policy 2021-26.
The proposed amendments also extend customs duty concessions on imported completely built electric vehicles. Therefore, manufacturers may continue benefiting from incentives while expanding local assembly operations.
