In a move that could significantly impact Pakistan’s automotive landscape, the International Monetary Fund (IMF) has recommended ending the preferential tax treatment currently given to locally manufactured hybrid and electric vehicles. Sources familiar with the discussions told ProPakistani that the IMF wants these vehicles and bikes removed from the Eighth Schedule and brought under the standard 18% sales tax regime starting from the next fiscal year.
Currently, hybrid vehicles produced in Pakistan benefit from lower sales tax rates, with vehicles up to 1800cc taxed at 8.5% and those between 1801cc and 2500cc at 12.75%. This tax incentive has been a cornerstone of Pakistan’s strategy to promote cleaner, more energy-efficient transport options. However, the IMF recommendation signals a shift toward standardizing tax policy across all vehicles.
Government officials from the Ministry of Industries and Production have reportedly been engaged in discussions with IMF representatives about the future of these tax exemptions. If implemented, the move would mark the end of a significant support mechanism for local hybrid and electric vehicle manufacturers, potentially affecting pricing, sales volumes, and investment decisions in the sector.
Industry experts warn that while removing exemptions could increase revenue for the government, it may also slow the adoption of environmentally friendly vehicles, which have gained momentum due to favorable tax treatment. Manufacturers are now preparing to evaluate the financial impact and strategize accordingly.
Consumers meanwhile, may face higher costs for hybrid and electric vehicles as the market adjusts to the new tax structure. With the exemption set to expire on June 30, 2026, stakeholders across the automotive industry are closely monitoring developments to understand how Pakistan’s green transport ambitions will be reshaped in the coming years.
Source: ProPakistani
