Pakistan Government Proposes Automotive Development Levy on Vehicles Over 1,000cc

PothikTV News Desk: 21 October 2026, 10:05 am

The Pakistan government has proposed imposing an Automotive Development Levy on locally manufactured and imported vehicles with engine capacities exceeding 1,000cc. According to official sources, the proposal comes as part of the country’s new auto policy, which is being finalized in consultation with the International Monetary Fund (IMF).

Sources revealed that the initial approved draft of the auto policy will be sent to the IMF for approval. The multilateral lender had previously demanded the imposition of an 18 percent sales tax on electric vehicles. However, the government has suggested alternative revenue-generating measures to compensate for the potential tax losses while attempting to protect lower-priced electric vehicles.

Under the proposed alternatives, a 10 percent Federal Excise Duty (FED) is recommended for electric vehicles valued above $75,000. Officials believe this measure could help maintain a reduced sales tax of 1 percent on lower-priced electric vehicles.

Consultations with the IMF will also cover the imposition of an additional Federal Excise Duty on luxury vehicles valued at over 20 million Pakistani rupees.

According to relevant documents, the proposed Automotive Development Levy on locally produced vehicles over 1,000cc includes a 2 percent levy on vehicles above 1,000cc and up to 10 percent on vehicles with engine capacities reaching 2,001cc.

Projections suggest that revenue generated from the automotive levy on light vehicles could increase from 37 billion rupees to 188 billion rupees over the next five years. Similarly, collections from buses and trucks under the same levy are expected to grow from 45 billion rupees to 232 billion rupees over the five-year period.