The government is considering substantial cuts in import duties and taxes on vehicles across multiple engine categories under a new five-year Auto Industry Development Policy, as part of efforts to enhance competition and improve consumer access to automobiles.
The proposed measures were raised during a meeting of the National Assembly Standing Committee on Finance, chaired by PPP MNA Syed Naveed Qamar, where officials briefed lawmakers on the upcoming auto policy. The existing auto policy is set to expire on June 30.
Minister of State for Finance Bilal Azhar Kayani informed the committee that the government was finalizing a new five-year framework for the automotive sector. Secretary Commerce Jawad Paul said the government plans to significantly reduce duties and taxes on imported vehicles over the coming years.
According to the briefing, the cumulative duty and tax incidence on vehicles with engine capacities of 1,800cc and above would be reduced to 74% from the current level of as much as 156%. For vehicles above 1,500cc, the government plans to lower duties to 57% from the existing 91%. Similarly, duties on vehicles ranging from 1,000cc to 1,500cc are proposed to be reduced to 52% from 76%.
For small cars with engine capacities up to 850cc, duties are proposed to decline to 42% from the current 66%.
Officials said the measures are aimed at gradually liberalizing the automotive sector while complying with Pakistan’s international trade commitments.
Debate on Electric Vehicle Taxation
The committee also reviewed the taxation regime for electric vehicles, with lawmakers expressing concerns over proposed tax measures and the absence of supporting infrastructure. Federal Board of Revenue (FBR) officials informed the committee that no Federal Excise Duty currently applies to electric vehicles priced up to $75,000, or roughly below Rs. 20 million.
However, electric vehicles priced above Rs. 20 million would be subject to the proposed excise duty under the Finance Bill.
Committee member Shahida Akhtar Ali questioned the government’s strategy for promoting electric vehicles without simultaneously developing charging infrastructure. “If there are no charging stations, how will these vehicles operate?” she asked, adding Pakistan’s power sector challenges also needed to be considered while formulating EV policies.
Several members urged the government to adopt a clear and consistent policy toward electric vehicles.
MNA Sharmila Faruqui argued the government should either fully support the transition to electric vehicles or avoid imposing measures that could discourage adoption. She opposed the imposition of taxes on electric vehicles, describing it as a policy contradiction at a time when countries around the world are encouraging cleaner transportation technologies.
Committee member Hina Rabbani Khar noted that electric vehicles remain more expensive than conventional internal combustion engine vehicles and said policymakers should account for rapid technological advancements in the sector.
“Automotive technology is evolving very quickly, with new developments emerging every six months,” she observed.
State minister Kayani acknowledged that even luxury electric vehicles currently enjoy a comparatively lower tax burden than conventional vehicles, reflecting the government’s broader objective of encouraging the shift toward cleaner mobility.
The committee directed officials to further refine the proposed policy framework and address concerns regarding taxation, infrastructure development and market competitiveness before the finalization of the new auto policy.