The International Monetary Fund (IMF) has reportedly introduced new conditions linked to Pakistan’s $7 billion loan program, raising concerns for the country’s burgeoning electric and hybrid vehicle sector. Sources indicate that the IMF has requested the removal of sales tax exemptions on locally manufactured electric vehicles (EVs) and electric bikes. Under the proposal, the standard 18% General Sales Tax (GST) would apply starting in the 2026–27 fiscal year.
The IMF is also urging the government to phase out tax exemptions for locally manufactured hybrid electric vehicles. Currently, hybrid vehicles benefit from tax incentives aimed at promoting cleaner and more sustainable transportation. Under existing provisions, locally manufactured hybrid electric vehicles are fully exempt from taxes until June 30, 2026. Afterward, a reduced sales tax applies: 8.5% for vehicles up to 1,800cc and 12.75% for vehicles up to 2,500cc.
According to sources, the IMF made these demands during discussions with the Ministry of Industries and Production, advocating the removal of these vehicles from the Eighth Schedule of the Sales Tax Act. This would effectively place EVs and hybrid vehicles under the standard GST regime.
If the government implements these changes, tax exemptions for locally manufactured hybrid vehicles and electric bikes could end as early as next year. Experts warn that the move could raise prices, reduce consumer demand, and slow Pakistan’s transition toward environmentally friendly transportation.
