The International Monetary Fund (IMF) has introduced new conditions for Pakistan’s $7 billion loan program, specifically targeting the tax protections currently enjoyed by locally assembled electric and hybrid vehicles.
Targeting EVs and E-Bikes
The IMF is demanding the withdrawal of sales tax exemptions for locally manufactured electric vehicles (EVs) and electric bikes. The IMF has proposed implementing the standard 18% General Sales Tax (GST) on these segments starting from the fiscal year 2026-27.
Hybrid Vehicles Under Pressure
The push for taxation extends to locally assembled hybrid electric vehicles (HEVs) as well. Currently, these vehicles benefit from policies designed to encourage eco-friendly transport.
Under existing rules, local hybrids are fully exempt from sales tax until June 30, 2026. After this date, a tax structure was planned: 8.5% for cars up to 1,800cc and 12.75% for those up to 2,500cc.
Shift to Normal Tax Regime
During discussions with the Ministry of Industries and Production, the IMF reportedly called for removing these vehicles from the Eighth Schedule of the Sales Tax Act. This move would strip away their special status and place locally made hybrids and electric bikes under the normal tax regime.
If the government accepts these demands, the tax holidays for local hybrids and electric bikes could end by next year. Industry experts warn that shifting to a standard tax regime would likely drive up vehicle prices and dampen consumer demand for green technology.
Keep following PakWheels on Google News. We will soon share the expected price increase on all locally assembled HEV and PHEV vehicles if this IMF condition is approved.