Pakistan’s electric and hybrid vehicle sector may face major changes as new conditions linked to the International Monetary Fund’s (IMF) $7 billion loan program have emerged, sources said on Monday.
According to officials familiar with the discussions, the IMF has demanded the removal of sales tax exemptions on locally manufactured electric vehicles (EVs) and electric bikes. Under the proposal, a standard 18% General Sales Tax (GST) would be imposed starting from the 2026–27 fiscal year.
The IMF has also called for the withdrawal of tax incentives currently available to locally manufactured hybrid electric vehicles. These incentives were introduced to encourage the adoption of cleaner and more fuel-efficient transportation in the country.
At present, locally produced hybrid electric vehicles are fully exempt from sales tax until June 30, 2026. After that, a reduced sales tax of 8.5% applies to vehicles with engine capacity up to 1,800cc, while hybrid vehicles up to 2,500cc are subject to a 12.75% tax.
Sources said the IMF raised the issue during discussions with the Ministry of Industries and Production, urging the government to remove these exemptions from the Eighth Schedule of the Sales Tax Act and bring electric and hybrid vehicles under the normal tax regime.
Currently, locally manufactured electric vehicles, hybrid vehicles, and electric bikes enjoy sales tax exemptions under the Eighth Schedule. The IMF wants these concessions withdrawn to broaden the tax base and ensure uniform taxation across sectors.
If the government accepts the IMF’s demands, tax exemptions for locally manufactured electric and hybrid vehicles and electric bikes would end from next year. Analysts warn the move could increase vehicle prices, affect consumer demand, and slow Pakistan’s transition toward environmentally friendly transport.
