Pakistanis planning to buy hybrid or electric vehicles have received yet another financial shock. Just when consumers were slowly shifting toward fuel-efficient and eco-friendly transport, the IMF has proposed a harsh 18% sales tax on locally manufactured hybrid and electric vehicles. This move risks destroying affordability, slowing innovation, and placing yet another burden on the middle class.
IMF Proposal Explained: What Is Changing?
The International Monetary Fund has recommended that Pakistan end all tax exemptions currently available to hybrid and electric vehicles. The proposal includes removing these vehicles from the Eighth Schedule, applying a uniform 18% sales tax, and bringing them fully into the regular tax system. If approved, the policy will be implemented from the next fiscal year.
Current Tax Structure on Hybrid Vehicles
At present, locally manufactured hybrid vehicles enjoy reduced sales tax to encourage clean transportation. Hybrid vehicles up to 1800cc are taxed at 8.5%, while those between 1801cc and 2500cc face a 12.75% sales tax. Electric bikes and electric vehicles also receive similar relief. However, this exemption is already set to expire on June 30, 2026, making the IMF’s proposal even more alarming.
Why This Decision Is Facing Strong Criticism
This recommendation has triggered serious concern among consumers and industry experts. The biggest impact will be on middle-class buyers who were finally considering fuel-efficient vehicles. An 18% tax will push prices far beyond reach. At the same time, Pakistan’s environmental goals will suffer, as higher prices will discourage people from switching to cleaner transport. Local manufacturers who invested due to government incentives may now face reduced demand, slower growth, and declining innovation.
IMF’s Argument: Revenue Over Sustainability?
The IMF believes tax exemptions reduce government revenue and create unequal treatment across industries. By imposing a single tax rate, it argues Pakistan can improve fiscal discipline. However, critics question whether revenue generation should come at the cost of clean energy progress, industrial growth, and consumer affordability.
Impact on Vehicle Prices and Market Growth
If the government accepts this proposal, locally made hybrid and electric vehicles will become significantly more expensive. Higher prices will reduce demand, slow the expansion of the electric vehicle market, and push consumers back toward petrol-based options. This could increase fuel imports and worsen pollution instead of solving existing problems.
Final Verdict: A Policy That Hurts More Than It Helps
While the IMF’s proposal may boost short-term revenue, it threatens long-term damage to Pakistan’s auto industry, environmental goals, and middle-class buyers. Instead of encouraging sustainable transportation, this policy risks turning hybrid and electric vehicles into a luxury few can afford. Once again, ordinary Pakistanis are left to pay the price.
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