Pakistan plans tax relief for auto industry in upcoming budget

ISLAMABAD: Preparations are underway to provide tax relief to the auto industry in the upcoming budget, with the proposal to abolish additional customs duty and reduce regulatory duty under the National Tariff Policy.

According to details, preparations are underway to provide significant tax relief in the upcoming federal budget to promote the local auto industry and manufacture cheap auto parts. Sources said that a proposal to set 5 percent customs duty on non-localized parts on CKD kits and 10 percent for localized parts is under consideration, with the aim of increasing local manufacturing.

Sources said that the scope of the electric vehicle policy has been proposed to be expanded from battery electric vehicles to all new energy vehicles, which will include EVs, plug-in hybrids, range extended and fuel cell vehicles.

The sources added that local manufacturers will be given special concessions for assembling a limited number of electric bikes, rickshaws and vehicles, while each company is proposed to be provided with concessional duty facilities up to 100 vehicles. This concession has been recommended to be effective till June 30, 2027.

Under the National Tariff Policy, a proposal has also been made to abolish additional customs duty and reduce regulatory duty. Along with this, there is a possibility of giving preferential protection to locally assembled electric vehicles over imported fully finished vehicles.

Sources say that proposals to keep the average tariff for local vehicles below 6 percent and to reduce the tariff in phases on imported petrol-powered vehicles are also under consideration. The Pakistan Automotive Parts and Accessories Manufacturers Association has recommended that electric bikes, rickshaws and vehicles be exempted from certain duty conditions.

The association has also recommended imposing only 1 percent tax on battery electric vehicles and 9 percent tax on plug-in hybrid, range extended and hybrid vehicles. According to sources, it has been proposed to maintain the concessional customs duty on CKD parts until June 30, 2028, which is expected to provide long-term stability to the local industry.