Government proposes major tax exemptions for Electric Vehicles

Advance Withholding Tax to be introduced to discourage ‘on money’ on resale of new cars

ISLAMABAD:In order to promote the use of electric vehicles in the country, the government has decided to offer massive tax exemptions.

As per the Ministry of Industries’ summary related to Electric Vehicles (EV) Policy for four-wheelers, which was approved by the cabinet, only 1pc sales tax would be imposed for locally made EVs up to 50kwh, as well as light commercial vehicles up to 150kwh. Besides, the duty on the import of charging equipment has also been capped at 1pc.

As per the summary, the Federal Excise Duty (FED) does not apply to EVs; the import of plant and machinery for manufacturing of EVs would be duty-free. The government has also removed additional customs duty and accounting services and tax (AST) on the import of EVs.

“Only 1pc tax will be imposed on the import of EV parts for the manufacturers. Apart from tax facilities, the government has also approved waiver of registration and annual renewal fee for EVs in Islamabad,” documents available with this scribe read.

It may be noted that the ECC had last week ratified the EV Policy for four-wheelers in order rationalise the costs of purchasing and manufacturing electric vehicles in Pakistan.

The inter-ministerial committee constituted by the federal cabinet had finalized the proposals with regard to EV Policy. The proposed fiscal incentives shall remain in force till June 30, 2026.

The EV policy for two-wheel and three-wheel electric vehicles had already been approved by the ECC.

According to documents, individuals interested in EVs (2-3 wheelers and HCVs) may be facilitated through policy intervention which could not be covered in the EV Policy (2-3 wheelers and FICVs) approved by ECC in its meeting held on 10th June 2020. The waiver of additional custom duty and value added tax on imports of EV (2-3 wheelers and HCVs) in CBU condition is proposed till 30th June 2025.

The policy for four-wheelers took time to be finalized due to its inherent complexities and long consultative process with existing original equipment manufacturers (OEMs). EV technology is at a formative stage and comparatively expensive viz-a-viz traditional fuel vehicles. Governments throughout the world are trying to make this technology affordable through different financial and fiscal incentives including disbursement of direct financial subsidy.

Meanwhile, the federal cabinet, during its last week’s meeting, also approved the introduction of new taxes on the resale of new vehicles so as to discourage the black marketing of vehicles. According to documents, the unnecessarily long delivery time for vehicles by the manufacturers is a usual complaint. The system is exploited which results in additional payment known as “On Money” (premium) by the buyers.

In order to discourage the practice of premium, additional withholding income tax has been approved on persons who buy locally manufactured cars from the OEMs and subsequently sell it within 90 days of delivery of vehicles.

As per details, a tax of Rs50,000 has been fixed on sale of vehicles of up to 1,000CC. Similarly, Rs100,000 tax has been fixed for sale of vehicles between 1,000CC to 2,000CC, whereas Rs200,000 would be the tax for sale of 2,000CC and above.

Ghulam Abbas
Ghulam Abbas
The writer is a member of the staff at the Islamabad Bureau. He can be reached at [email protected]


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