Pakistan is considering major incentives for electric vehicles (EVs) as the government looks to promote cleaner transportation and support the country’s growing auto industry. During recent discussions with the International Monetary Fund (IMF), the Ministry of Industries and Production proposed a reduced 1% General Sales Tax (GST) on electric vehicles instead of the 18% GST suggested by the IMF.
The proposal is part of Pakistan’s upcoming auto policy, which focuses on encouraging the use of New Energy Vehicles (NEVs) while balancing economic reforms agreed upon with international lenders.
Government officials believe that lower taxes on EVs can help accelerate the shift toward environmentally friendly transportation. The proposed reduced GST would apply to several categories of electric vehicles, including cars, buses, trucks, motorcycles, three-wheelers, tractors, pickups, and light commercial vehicles.
The ministry argued that hybrid vehicles already enjoy a concessional tax rate of 8.5%, so electric vehicles should receive even stronger incentives to make them more affordable for consumers and attractive for investors.
Another issue raised during the talks was the uneven taxation within the EV supply chain. Imported EV parts currently face only 1% GST, while locally manufactured components are taxed at 18%. Officials said this difference has created financial complications for local manufacturers, especially due to delays in tax refunds.
To solve this problem, the government suggested implementing a flat 1% GST across the entire EV manufacturing chain. Authorities believe this move would support local production, reduce costs, and improve the competitiveness of Pakistan’s EV industry.
At the same time, the government also expressed reservations about plans to sharply reduce tariffs on imported vehicles under the National Tariff Policy. Officials argued that maintaining higher import duties on foreign vehicles is necessary to protect local manufacturers from excessive competition.
Pakistan currently plans to gradually lower tariffs as part of its commitments under the IMF-backed economic reform programmed. The government has pledged to reduce the country’s overall average tariff rate over the next few years, with auto sector tariffs expected to decline significantly by 2030.
According to officials, the new auto policy is nearly complete and will soon be shared with the IMF before being presented to the federal cabinet for final approval.
The proposed policy is expected to shape the future of Pakistan’s automobile market by promoting electric mobility, supporting domestic manufacturing, and aligning economic reforms with long-term industrial growth goals.