Budget 2026-27: Pakistan Likely to Raise Sales Tax on Imported Electric Vehicles to 25%
ISLAMABAD: The federal government is considering increasing the sales tax on imported electric vehicles (EVs) to 25% in the upcoming fiscal year 2026-27 budget, while existing tax rates on hybrid vehicles are expected to remain unchanged, according to sources.
The proposed changes come as several tax incentives and exemptions granted to the electric vehicle sector are set to expire on June 30, 2026. These include the sales tax exemption on imports of Completely Knocked Down (CKD) kits by local EV manufacturers.
Under the current policy, the exemption applies to small cars and SUVs with battery capacities of up to 50 kilowatt-hours (kWh), as well as light commercial vehicles (LCVs) with battery capacities of up to 150 kWh.
Locally manufactured or assembled four-wheel electric vehicles are currently subject to a reduced sales tax rate of just 1% until June 30, 2026. Meanwhile, locally produced hybrid electric vehicles benefit from concessional sales tax rates ranging between 8.5% and 12.75%, a relief that is likely to be retained in the next fiscal year.
Sources said the government is also expected to align incentives aimed at promoting the automotive industry, boosting exports, and encouraging environmentally friendly transportation with broader policy objectives.
In addition, a proposal is under consideration to extend customs duty concessions on the import of EV components and parts to support green transportation and strengthen local electric vehicle manufacturing in Pakistan.
The federal cabinet approved the Electric Vehicle Policy in June 2020, allowing a five-year concessional customs duty regime for the import of specific parts used in electric two-wheelers, three-wheelers, and heavy commercial vehicles. These incentives were further expanded in December 2021 to include light commercial vehicles and vans.
Under the Customs (Amendment) Bill 2026, customs duty concessions on the import of completely built-up (CBU) electric vehicles will remain available until June 30, 2026.
The concession will be limited to a maximum of 10 vehicles of a single variant imported for local assembly or manufacturing, while the overall limit for the two- and three-wheeler segment will be 200 units.
The incentive will only apply to vehicles approved and certified by the Engineering Development Board under the EV Policy 2020.
