Pakistan is likely to introduce a significant change in its electric vehicle (EV) taxation policy, with reports suggesting that up to a 25% sales tax could be imposed on imported EVs in the upcoming Budget 2026-27. The move comes as several tax exemptions for the EV sector are set to expire on June 30, 2026.
Under the current policy, imports of completely knocked down (CKD) kits for eligible electric vehicles enjoy sales tax exemptions. These incentives apply to small electric cars and SUVs with battery capacities of up to 50 kWh, as well as light commercial vehicles (LCVs) with battery capacities of up to 150 kWh. However, these concessions are scheduled to end at the close of the current fiscal year.
Current and Proposed EV Tax Structure
| Category | Current Tax Rate | Expected FY 2026-27 |
|---|---|---|
| Imported Electric Vehicles | Concessional/Exemptions Available | Up to 25% Sales Tax |
| Locally Assembled EVs | 1% Sales Tax | Exemption Expiring June 30, 2026 |
| Hybrid Electric Vehicles | 8.5% – 12.75% Sales Tax | No Change Expected |
| EV CKD Kit Imports | Tax Exemptions Available | Exemptions Expiring June 30, 2026 |
Industry sources indicate that hybrid vehicles are unlikely to face any additional tax burden in the next fiscal year, making them potentially more attractive to buyers if EV taxes increase.
Meanwhile, the Senate Standing Committee on Finance has approved the Customs (Amendment) Bill 2026, which supports the implementation of the Automotive Industry Development and Export Policy (AIDEP) 2021-26. The government has also proposed extending customs duty concessions on EV parts and components to encourage local manufacturing and support the transition toward cleaner transportation.
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The potential tax increase could impact the affordability of imported electric vehicles in Pakistan, while simultaneously encouraging local production and assembly. Consumers, automakers, and investors are now closely watching the federal budget announcement for final confirmation of the proposed measures.
