Pakistan has rejected a proposal linked to the International Monetary Fund (IMF) regarding the imposition of an 18% General Sales Tax (GST) on electric vehicles (EVs). Instead, the government is pushing for a significantly lower tax rate under its upcoming auto policy to support clean and affordable transportation in the country.
The Ministry of Industries has taken the position that electric mobility should be encouraged rather than discouraged, especially at a time when Pakistan is trying to reduce fuel imports and shift toward sustainable energy solutions. Officials have proposed a reduced 1% GST on electric vehicles, including electric cars, buses, motorcycles, and commercial vehicles, to promote wider adoption across the market.
According to policymakers, hybrid vehicles are already benefiting from lower taxation, and extending similar incentives to EVs is seen as essential for building a competitive green transport sector. The government believes that without strong fiscal support, electric vehicles will remain out of reach for most consumers due to high initial costs and limited infrastructure.
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Authorities also pointed out inconsistencies in the taxation structure for imported EV components and locally manufactured parts. To address this issue, they have proposed a uniform 1% tax rate across the entire value chain. This step is expected to simplify the system and encourage local assembly and manufacturing of electric vehicles in Pakistan.
In ongoing discussions with the IMF, broader reforms in the automotive sector were also reviewed, including tariff restructuring under Pakistan’s National Tariff Policy. The government aims to gradually reduce tariffs while ensuring long-term stability and growth for the local auto industry.
Officials say the policy direction reflects Pakistan’s intent to balance fiscal discipline with environmental goals, while also making electric mobility more accessible for the general public.
