The International Monetary Fund (IMF) has urged Pakistan to remove the sales tax exemption on locally manufactured hybrid electric vehicles and motorcycles.
According to sources, the IMF has recommended that the government impose the standard 18% sales tax on these vehicles from the upcoming fiscal year.
Currently, hybrid electric vehicles produced locally benefit from exemptions under the Eighth Schedule of the Sales Tax Act. The IMF has suggested removing these exemptions in discussions with the Ministry of Industries and Production and bringing hybrid vehicles and bikes under the normal tax regime.
Under existing law, locally manufactured hybrid electric vehicles under 1800 cc are subject to an 8.5% sales tax, while vehicles from 1801 cc to 2500 cc are taxed at 12.75%.
The government had previously extended the tax exemption on hybrid vehicles and motorcycles until June 30, 2026, but under the IMF proposal these exemptions would be lifted starting from the next financial year.
This move by the IMF is expected to increase the prices of hybrid vehicles and motorcycles, potentially affecting consumers and the local automotive industry.