Pakistan Auto Policy 2021-26: Sales tax slashed on local electric vehicles

ISLAMABAD: The government on Wednesday announced a new Auto Industry Development and Export Policy (AIDEP 2021-26) under which sales tax on local electric vehicles (EVs) has been slashed from 17% to 1%.

The policy aims to promote small cars, localisation, incentivise introduction of new products in tractors and motorcycles, consumer protection, and promote new technologies i.e. EVs and hybrids to target export markets.

The draft, released by the Engineering Development Board of Ministry of Industries and Production, highlighted that custom duty on specific parts of the electric vehicles has been fixed at 1%.

Under the policy, customs duty on the import of EVs completely built-up (CBU) was slashed to 10% from 25%; while customs duty on specific parts of electric vehicle motorcycles, three-wheelers, and heavy commercial vehicles was set at 1%.

The auto policy also allowed hybrid manufacturing in policy as sales tax has been reduced to 8.5%.

According to the draft, customs duty on specific parts for hybrid EV and plug-in hybrid EV to attract 4% and 3%, respectively.

The board has also decided to reduce the regulatory duty on CBU import of hybrids (15% for above 1,800cc, 0% for 1,800cc and below).

Furthermore, the policy draft highlighted that imports of vehicles will not be allowed if they do not meet safety standards.

“No vehicle shall be locally manufactured/imported after June 30, 2022 which is not compliant of shortlisted WP 29 regulations,” the document read.