Pakistan’s move toward cleaner transportation is beginning to reflect in its revenue figures. The Federal Board of Revenue (FBR) has collected Rs10.22 billion under the New Energy Vehicle (NEV) Adoption Levy during the first half of fiscal year 2025–26, according to data released by the Ministry of Finance.
The figures indicate a notable rise in collections during the second quarter, compared to a relatively modest inflow in the first quarter, signaling that the levy has gained momentum following its rollout.
Rising Compliance After Initial Implementation
During the July–September period, the levy generated around Rs3 billion, while collections increased significantly in the following quarter. This improvement is largely attributed to tighter enforcement and growing awareness among manufacturers and importers of internal combustion engine (ICE) vehicles.
As compliance mechanisms have strengthened, revenue performance has also shown steady improvement.
Balancing Revenue and Environmental Goals
Introduced through the Finance Act, 2025, the NEV Adoption Levy serves a dual purpose. On one hand, it creates an additional revenue stream for the government. On the other, it supports Pakistan’s environmental and climate objectives by discouraging excessive reliance on conventional fuel-based vehicles.
The levy aligns with broader efforts to reduce emissions from the transport sector, which remains one of the major contributors to urban pollution.
Who Is Covered Under the Levy?
The levy applies to locally manufactured and imported ICE vehicles, with rates determined by engine size and vehicle category. As per the law, all proceeds collected are transferred to the Federal Consolidated Fund.
The tax is calculated on an ad valorem basis, meaning it is charged as a percentage of the vehicle’s invoice or assessed value, including relevant duties and taxes.
Applicable Levy Rates
The government has notified the following rates:
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Vehicles under 1300cc: 1%
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Vehicles between 1300cc and 1800cc: 2%
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Vehicles above 1800cc: 3%
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Buses and trucks: 1%
Manufacturers are required to pay the levy at the time of production or assembly, while importers must settle it during customs clearance.
Exemptions to Encourage Clean Mobility
To promote the adoption of alternative energy vehicles, the levy does not apply to:
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New Energy Vehicles (NEVs)
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ICE vehicles manufactured exclusively for export
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Vehicles used by diplomatic missions
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Other categories notified by the federal government
The law also empowers the government to adjust rates or revise categories through official notifications as policy priorities evolve.
Industry Outlook
Automotive and policy experts view the NEV Adoption Levy as a step in the right direction, both from a fiscal management and environmental sustainability perspective. However, they caution that taxation alone will not be sufficient to drive a large-scale shift toward electric and hybrid vehicles.
Long-term success will depend on complementary measures such as consumer incentives, expansion of charging infrastructure, and regulatory stability.
Closing Thoughts
The Rs10.22 billion collected in the first half of FY26 underscores the growing impact of the NEV Adoption Levy. As enforcement improves and awareness spreads, the levy is expected to play a more prominent role in shaping Pakistan’s transport landscape—provided it is supported by consistent policies and infrastructure development.