According to reports, the International Monetary Fund (IMF) has proposed raising the sales tax on petrol and diesel Small Car with engines over 850cc to 18%. During the upcoming budget negotiations with Pakistan, the IMF has demanded an end to tax concessions on locally manufactured and imported vehicles powered by petrol and diesel.
Sources reveal that the IMF plans to increase the sales tax on vehicles over 850cc from the current 12.5% to 18%, and similarly, the sales tax on 850cc Small Car will also be raised from 12.5% to 18% in the upcoming budget. Additionally, the IMF has suggested that over the next five years, 50% of motorcycles and rickshaws should be converted to electric, with the electric vehicle share increasing to 30%.
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At present, a 12.5% sales tax is applicable on locally assembled or manufactured vehicles. However, under the proposed budget, this rate is expected to be increased to between 15% and 18%. The media reports indicate that these changes will come into effect from July 1, 2025.
This initiative aims to promote the adoption of electric vehicles and generate revenue by increasing taxes on conventional vehicles over 850cc. Car buyers and industry stakeholders should prepare for higher costs in the coming months, especially for larger engine vehicles, as the government moves towards a more environment-friendly and revenue-generating model.
