SBP Launches Second Regulatory Sandbox Cohort
October 5, 2026
IMF seeks 18% GST on Pakistan EVs, putting the proposed 1% tax break and auto policy incentives at risk.
Pakistan’s electric vehicle push has run into a major tax hurdle, with the International Monetary Fund (IMF) pressing the government to reconsider a proposed 1% sales tax on electric and new-energy vehicles. The issue has emerged during ongoing discussions over Pakistan’s draft Auto Policy 2026-31.
Sources cited in reports say the IMF has questioned preferential tax treatment for EVs and their components, arguing that the standard GST rate should apply. Under the proposal discussed by officials, the rate could rise to 18%, potentially changing the economics of EV purchases and local assembly.
The difference is substantial for buyers. A vehicle priced at Rs10 million would incur Rs100,000 in sales tax at 1%, compared with Rs1.8 million at 18% a Rs1.7 million increase before any knock-on effect on final pricing.
The IMF’s concerns reportedly extend beyond battery-electric vehicles. Plug-in hybrid electric vehicles (PHEVs) and range-extended electric vehicles (REEVs), which were set to receive preferential treatment under the draft policy, could also face an 18% GST rate.
The proposed policy had positioned lower taxation as a tool to accelerate EV adoption, attract investment and encourage local manufacturing. It also includes exemptions or concessions involving federal excise duty, capital value tax and withholding tax, alongside relief for certain EV parts and charging equipment.
However, the IMF has reportedly sought additional information before approving the draft policy. The government is therefore expected to revisit the proposed tax structure and hold further consultations with automakers and importers before seeking formal approval.
The uncertainty comes as Pakistan attempts to reshape its auto industry around greater competition, exports and cleaner vehicle technologies. The draft policy also proposes sharply lower customs duties on conventional vehicles over five years and aims to connect local manufacturers and parts producers with global supply chains.
For consumers, the key question is now whether the government can preserve EV incentives while addressing the IMF’s fiscal concerns. Any shift from the proposed 1% rate to 18% would require formal government action and could significantly alter the price outlook for eligible locally assembled EVs.
