New Auto Policy Proposes Rs. 85 Billion in Sales Tax Relief for Electric Vehicles; Measures and New Automotive Levies Subject to IMF Approval
ISLAMABAD: The upcoming national auto policy has built high hopes for the EV industry with its proposals of Rs. $85 billion in sales tax credits for EVs, and the taxes that would have been collected will be replaced by other tax mechanisms.
Media outlets report that policymakers are considering a plan to make the sales tax for EVs with up to $75,000 price tags a mere 1 percent. The proposed increase in the sales tax for EVs from 1 percent to 18 percent by the International Monetary Fund (IMF) follows the plan and conditions will ultimately be subject to final approval by the lender.
Some of the major elements of the proposed auto policy and levy measures are highlighted below:
Automotive Development Levy on Petrol Vehicles: The draft auto policy suggests introducing the automotive development levy for petrol and internal combustion engine (ICE) vehicles. A 2 per cent charge is suggested for cars from 1,001cc to 2,000cc, and a 10 per cent levy is proposed for those 2,001cc and above – both locally manufactured and imported.
Electric vehicles costing more than Rs. 5 lakh will also be subject to a proposed Federal Excise Duty (FED) of 10 percent. While carbon taxes on petrol, diesel and traditional combustion engine vehicles are likely to continue, 20 million is the size of the carbon tax levy expected to be in place.
Revenue Projections and Legislative Amendments: The following are projections of revenues under the new framework, and proposed changes to the legislation: The levy on petrol and diesel vehicles will generate Rs. 25 billion. An estimated Rs. 37 billion from cumulative levies. Automotive development levy to 45 billion from buses & trucks. These proposals will need to be incorporated into the Finance Bill, and all sweeping measures will need to be formally approved by the IMF.