Pakistan’s proposed automotive policy could introduce a new levy on imported and locally manufactured vehicles, with rates varying by engine capacity and vehicle category. The draft policy, approved by Prime Minister Shehbaz Sharif, proposes a 10% levy on cars above 2,000cc and a 2% rate for cars between 1,001cc and 2,000cc.
However, cars below 1,000cc would remain exempt under the proposal. Two-wheelers, three-wheelers and agricultural tractors would also carry a zero levy rate.
The proposed Automotive Development Levy would cover specified internal combustion engine (ICE) vehicles, including imported and locally assembled or manufactured models. Its final impact will depend on the implementation details and how authorities calculate the levy.
Which Cars Could Face the New Levy?
Under the draft policy, the proposed levy would depend primarily on engine capacity for the specified passenger vehicle category.
- Cars below 1,000cc: 0% levy
- Cars between 1,001cc and 2,000cc: 2% levy
- Cars above 2,000cc: 10% levy
Therefore, vehicles with larger engines would face a higher proposed rate than those in the middle category. Meanwhile, cars below 1,000cc would fall outside the levy under the draft.
The proposal covers vehicles classified under Pakistan Customs Tariff (PCT) 87.03 within the specified engine-capacity categories. It also applies to imported and locally assembled or manufactured internal combustion engine vehicles.
What Levy Rates Are Proposed for Other Vehicles?
The draft policy also sets rates for commercial and other vehicle categories. Two-wheelers, three-wheelers and agricultural tractors would receive a zero rate, while several commercial vehicle categories would face a proposed 2% levy.
| Vehicle Category | Proposed Levy |
|---|---|
| Two-wheelers and three-wheelers | 0% |
| Agricultural tractors | 0% |
| Cars below 1,000cc | 0% |
| Cars between 1,001cc and 2,000cc | 2% |
| Cars above 2,000cc | 10% |
| Prime movers, excluding those used for agriculture | 2% |
| Trucks and light commercial vehicles (LCVs) | 2% |
| Buses and vans | 2% |
These proposed rates distinguish between passenger cars and other vehicle categories. However, the draft does not establish that every vehicle would face the same charge.
Will the New Car Levy Increase Vehicle Prices?
The proposed levy could affect the cost of vehicles covered by the policy. However, the actual impact on prices remains unclear because the draft does not specify the calculation basis or implementation date.
For example, the proposed rates identify which vehicle categories would face a levy, but they do not establish the final amount payable on an individual vehicle. Authorities would need to clarify the applicable calculation method before buyers could assess the precise cost implications.
The proposal covers both imported and locally assembled or manufactured vehicles within the specified categories. Consequently, the levy would not apply exclusively to imported cars.
When Could the Automotive Development Levy Take Effect?
The Automotive Development Levy remains part of the draft auto policy described in the proposal. The final implementation details, including the effective date and the basis for calculating the rates, will determine how the levy operates.
Until authorities clarify these details, the proposed percentages should not be treated as confirmed additions to vehicle prices. Buyers and industry stakeholders will need to review the final policy to understand its practical effects.
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