New auto policy approved, major tax relief announced on electric vehicles
Published 6 hours ago | By Nouman Shakeel
Prime Minister Shehbaz Sharif has approved a new auto policy to be implemented from 2026 to 2031, in which the government has decided to provide protection to local assemblers of conventional vehicles for another four years and introduce special tax incentives to reduce the prices of new energy vehicles.
The new policy has given top priority to electric vehicles. Battery electric vehicles will get the most tax benefits, while range-extended electric and plug-in hybrid vehicles will be kept in separate categories. The prime minister did not agree to the proposal to give equal tax incentives to all three categories.
In addition to new energy vehicles, only one percent sales tax will be levied on their complete knockdown kits, parts, raw materials and other essential inputs. These vehicles and related items have also been exempted from federal excise duty, capital value tax and withholding tax.
The financing limit has also been increased to make the purchase of electric vehicles easier for the common consumer. The government has approved increasing the maximum loan amount from Rs 3 million to Rs 10 million, while the loan repayment period has been extended from three years to five years.
The new policy also focuses on charging infrastructure. Customs duty on importing charging and battery swap stations will be only one percent, while it has been decided to provide viability gap funding for setting up battery swap stations.
On the other hand, it is proposed to maintain equal treatment in terms of tax and duty for hybrid and conventional internal combustion engine vehicles. A proposal to impose additional federal excise duty on conventional vehicles has also been approved so that the price difference arising as a result of tariff reduction can be balanced to some extent.
However, to protect buyers of small vehicles from additional burden, the Prime Minister has directed to remove the proposed additional federal excise duty on conventional vehicles with engines below 1000 cc.
