Govt mulls 50% tax break for EVs

The government will grant up to 50% tax exemption to four-wheel electric vehicles under the newly proposed electric vehicle policy, said Minister for Industries and Production Hammad Azhar.

Briefing the National Assembly Standing Committee on Industries and Production on Tuesday, the minister shared that the government had planned to waive 50% of taxes applicable to the production of 1,800cc electric and hybrid cars.

He revealed that 25% of taxes on cars having engine capacity of more than 1,800cc would be waived as well. “In addition, the government will waive the fee for registration and annual renewal for electric vehicles,” he said.

The minister pointed out that around six companies were set to manufacture 418,000 units annually. He added that the enterprises had invested over $470 million in setting up the infrastructure for manufacturing hybrid and electric vehicles.

Azhar pointed out that the government had planned to announce a five-year policy for four-wheel electric vehicles within the next two weeks. “The government will also waive 50% duty on the import of four-wheel electric vehicles,” he said. “The electric vehicle policy for two and three-wheelers is already in place.”

The government was in talks with different countries for the manufacturing of electric vehicles, he said.

Azhar highlighted that the government would try to maintain balance while finalising the policy and stressed that the government did not want to use existing players in the automobile segment. Committee members pointed out that the UK and EU gave subsidies on electric vehicles. However, Azhar held the view that Pakistan should not give subsidy rather it should reduce taxes on electric vehicles to promote their use.

Earlier, an inter-ministerial committee held a meeting and recommended tax incentives for four-wheel electric cars under the newly proposed policy. Azhar chaired the inter-ministerial committee meeting to finalise the EV policy for four-wheelers.

In the draft policy, customs duty on electric vehicle’s specific parts has been proposed at 1%. Duty rates for non-localised (non-EV) and localised parts have been proposed at 10% and 25% respectively across the board for all new entrants and existing manufacturers. General sales tax and withholding tax on EVs having battery pack of 50 kWh or less (as an alternative for 800cc cars) have been proposed at 1%.

Minister for Science and Technology Fawad Chaudhry suggested addition of light commercial vehicles with a higher battery pack for similar incentives under the policy. The committee agreed to the proposal.

The Engineering Development Board (EDB) was advised to make required amendments. The committee proposed the waiver of additional customs duty and additional sales tax for both completely knocked down and completely built units.

Published in The Express Tribune, November 18^th, 2020.

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