Budget: tax on hybrid cars may stay unchanged; up to 25pc sales tax on import of EVs likely

ISLAMABAD: The government is likely to impose up to 25 percent sales tax on the import of electric vehicles (EVs) in the upcoming budget, while tax rates on hybrid vehicles are expected to remain unchanged in the next fiscal year.

Sources told Business Recorder that several sales tax exemptions are set to expire on June 30, 2026. Under the current exemption schedule, the sales tax exemption on the import of completely knocked down (CKD) kits for electric vehicles by local manufacturers will lapse on that date.

The exemption currently applies to small cars and SUVs with battery capacities of up to 50 kWh, as well as light commercial vehicles (LCVs) with battery capacities of up to 150 kWh.

READ MORE: Hybrid tax incentives spark auto industry concerns

One percent sales tax is applicable on the locally manufactured or assembled electric vehicles (4 wheelers) till June 30, 2026, including small cars/SUVs with a 50 kWh battery or below and light commercial vehicles (LCVs) with a 150 kWh battery or below.

Lower rate of sales tax (8.5 percent to 12.75 percent) is also applicable on locally manufactured Hybrid electric vehicles till June 30, 2026, they added.

The Senate Standing Committee on Finance approved the Customs (Amendment) Bill, 2026, to give effect to the financial provisions of “Automotive Industry Development and Export Policy” (AIDEP) 2021-26.

The purpose of these amendments is to give effect to the financial provisions of AIDEP 2021-26. Following detailed deliberations, the Committee unanimously recommended the Customs (Amendment) Act, 2026.

The government has proposed an amendment to extend customs duty concessions on the import of electric vehicle (EV) parts and components until June 30, 2026, a move aimed at promoting green transportation and encouraging local manufacturing of EVs in Pakistan.

Federal Cabinet had initially approved the EV policy on June 16, 2020, granting concessional customs duty for five years from July 1, 2020, on imports of EV-specific parts for electric two- and three-wheelers, conditional import of new electric two- and three-wheelers in completely built-up (CBU) condition by manufacturers, and components for electric heavy commercial vehicles, including trucks, buses, and prime movers.

The concessions were incorporated in Part-V(A) of the Fifth Schedule to the Customs Act, 1969, through the Finance Act, 2020.

Later, under the Automotive Industry Development and Export Policy (AIDEP) 2021-26, approved on December 21, 2021, the federal cabinet extended the existing concessions for electric two- and three-wheelers and electric heavy commercial vehicles until June 30, 2026. The policy also expanded concessions to imports of EV-specific parts for light commercial vehicles (LCVs) and vans on the same basis as other four-wheelers.

The proposed amendment seeks to align the concessions available under AIDEP 2021-26 with those listed in Part-V(A) of the Fifth Schedule to the Customs Act, 1969.

As a result of the Customs (Amendment) Bill, 2026, the government has extended customs duty concessions on the import of completely built electric vehicles (CBUs) until June 30, 2026, for up to 10 units of the same variant to be assembled or manufactured locally, with a maximum limit of 200 units for the 2-3 wheeler segments. The concession applies to vehicles approved and certified by the Engineering Development Board under the EV Policy 2020.

Copyright Business Recorder, 2026